Henkel: Annual Report 2007

Transcription

Annual Report 2007
A World of Customers
Reliability
Regional and Global
Consumer insights
Regional and global
Trust
Quality
Brands portfolio
Regional and global
Solutions
Advice
Wealth of brands
Premium brand products
Brands
Innovations
Performance
Success
Quality
Internationality
Reliability
Individual advice
Customized sollutions
Wealth of brands
Quality
Innovative strength
Service
Strong
sales team
Sustainability
Added value
Solutions
Regional
and
global
Wide
product range
Quality from
Solutions
Service
Added value
Henkel Group
KEY FINANCIALS
HIGHLIGHTS
2006
2007
+/–
12,740
13,074
2.6 %
1,298
1,344
3.5 %
10.2
10.3
0.1 pp
Net earnings
871
941
8.0 %
Earnings after minority interests
855
921
7.7 %
in euros
1.99
2.14
7.5 %
exceptional gains and restructuring
in %
14.5
15.4
0.9 pp
charges: +0.6 percentage points to
Capital expenditures on property,
plant and equipment
431
470
9.0 %
Research and development expenses
340
350
2.9 %
in million euros
Sales
Operating profit (EBIT)
Return on sales (EBIT)
in %
Earnings per preferred share1)
Return on capital employed (ROCE)
» Organic sales growth:
+5.8 percent
» Gross margin: +1.1 percentage
points to 46.4 percent
» Return on sales (EBIT) adjusted for
10.5 percent
» EPS adjusted for exceptional gains
Employees (annual average)
number
51,716
52,303
1.1 %
and restructuring charges: +14.5
Dividend per ordinary share1)
in euros
0.48
0.512)
6.3 %
percent
Dividend per preferred share1)
in euros
0.50
0.532)
6.0 %
1)
basis: share split (1:3) of June 18, 2007
proposed
3)
inventories + trade accounts receivable – trade accounts payable
pp = percentage points
2)
SALES BY BUSINESS SECTOR1)
Corporate 2 %
Adhesives
Technologies 43 %
age of sales: –1.8 percentage points
to 11.5 percent
EBIT BY BUSINESS SECTOR2)
Laundry &
Home Care 32 %
Adhesives
Technologies 43 %
Laundry &
Home Care 31 %
Cosmetics/Toiletries 26 %
SALES BY REGION1)
Corporate 2 %
» Net working capital3) as a percent-
EBIT BY REGION2)
Europe/Africa/
Middle East 65 %
Asia-Pacific 8 %
Latin America 5 %
Asia-Pacific 6 %
Europe/Africa/
Middle East 69 %
Latin America 4 %
North America 21 %
North America 20 %
1)
including Corporate; for reconciliation with Henkel Group:
Corporate = sales and services not assignable to the individual business sectors
2)
excluding Corporate
Business Sectors at a Glance
Laundry & Home Care
Cosmetics/Toiletries
Adhesives Technologies
Leading positions worldwide
Leading positions worldwide
Leading our markets worldwide
Driving growth through innovation
and strong brand equities
Achieving profitable growth with attractive product innovations aligned
to exacting consumer demands
Driving growth through innovations and acquisitions
Expanding our world market position from a strong European and
North American base
KEY FINANCIALS
Expanding our strong positions
in Europe and North America and
selectively extending our presence
in the growth regions
KEY FINANCIALS
in million euros
2006 2007
+/-
Sales
4,117 4,148
2006 2007
+/-
0.8 %
Sales
2,864 2,972
359
12.5
449
459
2.1 %
Operating profit
(EBIT)
Return on sales
(EBIT) in %
10.9
11.1
0.2 pp1)
Return on sales
(EBIT) in %
1.5 pp1)
Return on
capital employed
(ROCE) in %
Return on
capital employed
(ROCE) in %
1)
15.2
16.7
KEY FINANCIALS
in million euros
Operating profit
(EBIT)
Developing new applications and
growth potential in all regions of
the world
15.4
in million euros
2006 2007
+/-
3.7 %
Sales
5,510 5,711
3.6 %
372
3.8 %
Operating profit
(EBIT)
579
621
7.3 %
12.5
0.0 pp1)
Return on sales
(EBIT) in %
10.5
10.9
0.4 pp1)
1.3 pp1)
Return on
capital employed
(ROCE) in %
15.9
16.9
1.0 pp1)
16.7
percentage points
New Products in 2007
» Bref Jumbo
» Bref Power Universal Cleaner
» Coordinated European relaunch
of the premium detergent brands
Persil, Le Chat, Dixan and Wipp
Express with revamped formulations, packaging and design
aesthetics
» Mir designer version
» “Persil 100 Years” Centennial
Edition
» Perwoll Black Contrast
» Perwoll Total Care
» Purex Soft Sensitive Skin
» Purex Natural Elements
» Somat 7
» Vernel One Rinse Only
» Vernel Glamour Edition
» WC Frisch Complete
» Activ Dr. Hoting
» BLONDME
» Bonacure Styling Treat
» Diadermine Lift+ Sun Effect
» Diadermine Wrinkle Expert 3D
» Diadermine Age ExCellium
» Dial Yogurt Hand Wash
» Fa Natural & Pure, Natural & Soft
» Fa Foam Soap
» Gliss Kur Oil Nutritive
» got2b styl-tini
» Natural & Easy Grey Expert
» RGX Body Spray
» Schauma Kiwi
» Schwarzkopf Men Perfect
» Taft Volume Power
» Taft Sensitive
» Adhesin FiberPlus
» Bonderite 2718
» Dorus FD 150/6 LS
» Granocoat X
» Hysol QMI 708
» Hysol QMI 5100/5200
» Loctite 435/438
» Loctite Cure Jet LED
» Metylan Power Granulate plus
» MiraFoil
» P3 Disperse
» Pattex PL600
» Sista Universal Seal and Repair
» Sista Easy Silicone
» Tangit FP Fire Protect System
» Thomsit DS 40
+ 5.5 % + 5.8 % + 6.5 %
organic sales growth
Major Events in 2007
Henkel Group
25 years of the “Fritz
Henkel Award for Innovation”
488 prize-winners, over
100 Henkel innovations –
this is the balance from 25
years of the “Fritz Henkel
Award for Innovation”, an
accolade exclusively reserved for Henkel innovations
that have succeeded in
becoming established in
their markets.
Henkel share split
In order to further enhance the liquidity and
attractiveness of Henkel
shares, our Annual General Meeting resolved to
implement a share split in
the ratio 1:3. The quotation switch took place on
Monday, June 18, 2007.
Laundry &
Home Care
100 years of Persil
In 2007, Henkel’s most
successful and innovative
quality brand celebrated a
major anniversary: Persil
turned 100. Persil was
launched onto the market in 1907 as the first
self-acting detergent in
Germany. In 2007, Persil
was once again extensively
re-invented as one of the
world’s leading premium
detergent brands.
New Purex concentrate
Its ingredients come from
nature and, as an ultraconcentrate, Purex Natural
Elements enables savings
to be made in both packaging materials and
transport weight. Just one
of Henkel’s responses to
growing environmental
awareness in the USA.
Cosmetics/
Toiletries
Adhesives
Technologies
Successful through
innovations
One of the focuses of 2007
was our worldwide innovation offensive. With new
instruments – such as the
intranet-based “Innovation
Lounge”, our international
Henkel to acquire National Starch businesses
Henkel has concluded an
agreement involving a
back-to-back transaction
with Akzo Nobel allowing
us to acquire the Adhesives
and Electronic Materials
businesses from National
Starch in the course of
2008. The agreed purchase
price is 2.7 billion pounds
sterling (close to 4 billion
euros).
ideas community – we succeeded in creating numerous innovative product
concepts. Working closely with consumers and
customers and using the
results of our thorough
trend research activities,
we identified three main
fields of focus for the future: Nature, Anti-Aging,
and Men as a target group.
Our successful innovations in 2007 included,
for example, the body care series Fa Natural & Pure and Fa Natural & Soft,
our anti-aging skin care
product Diadermine Age
ExCellium and the first
hair toning gel especially
for men, Schwarzkopf
Men Perfect.
Common markets,
faster growth
April 1, 2007 saw the birth
of our new business sector
Adhesives Technologies, a
merger of the two previous
business sectors Consumer
and Craftsmen Adhesives
and Henkel Technologies.
Working together, these
businesses will be able to
develop their markets more
effectively and achieve
even faster growth. Alois
Linder heads up the new
business sector. Jochen
Krautter, the former head
of Henkel Technologies,
has now retired after 34
years with Henkel.
Contents
01 The Company
02 Preface
06 Report of the Supervisory Board
08 Management Board
10 Successful with our Customers
12 Top Brands
14 Innovations
The Company
We are customer-driven.
This is the first of our ten corporate values. For more than
130 years, we have based our
success on our insights into the
needs of consumers. And it is
this knowledge that generates
our innovative power. Innovations enable us to hone our
competitive edge to the benefit
of our customers in both the
retail and industrial segments.
Quality from Henkel –
for a world of customers.
16 Shares and Bonds
21 Group Management Report:
Corporate Governance
32 Group Management Report Subindex
33 Group Management Report
33 Operational Activities
37 Business Performance
41 Assets and Financial Analysis
44 Employees
46 Procurement
46 Production
47 Research and Development
49 Marketing and Distribution
50 Sustainability/Corporate Social Responsibility
52 Business Sector Performance
65 Risk Report
69 Outlook for the Henkel Group
70 Subsequent Events
71 Consolidated Financial Statements Subindex
72 Consolidated Financial Statements
72 Consolidated Statement of Income
73 Consolidated Balance Sheet
74 Consolidated Cash Flow Statement
75 Notes to the Consolidated Financial Statements
124 Auditors’ Report
125 Corporate Management of Henkel KGaA
129 Further Information
130 Responsibility Statement
131 Quarterly Breakdown of Key Financials
132 Ten Year Summary
Credits, Calendar
Annual Report 2007
1
Preface
Once again in fiscal 2007, our 131st year, we were able to add to the Henkel success story with
a further improvement on the record results achieved in 2006. As always, this accomplishment derives from our ability to satisfy the needs and desires of our customers to the best
possible degree with strong brands and innovative technologies.
Robust organic growth in 2007 enabled us to further increase both sales and operating profit,
despite an often difficult environment. Raw material prices rose once again, while an appreciable decline in the construction industry in North America was exacerbated by the crisis in
the mortgage and real estate sector and uncertainties in the financial markets. These factors
exerted an adverse effect on major customers served by our industrial business – and thus ourselves. Added to this were sustained price and competitive pressures in many consumer product
markets. Overall, our businesses successfully negotiated numerous disruptions in 2007.
We therefore see our successful development – to which all our business sectors and regions
contributed – as further proof of the quality of our strategy, of our innovative products and
of our employees worldwide.
The salient facts and figures relating to fiscal 2007 read as follows:
» Sales rose by 2.6 percent to 13,074 million euros
» Adjusted for foreign exchange, acquisitions and divestments, the Henkel Group posted an
organic growth rate of 5.8 percent
» We were able to increase operating profit (EBIT) by 3.5 percent to 1,344 million euros
» The EBIT margin improved by 0.1 percentage points to 10.3 percent
» Return on capital employed (ROCE) increased by 0.9 percentage points to 15.4 percent
» Earnings after minority interests grew to 921 million euros compared to 855 million euros
in the previous year
» Earnings per preferred share improved to 2.14 euros (previous year 1.99 euros)
» The Management Board, the Shareholders’ Committee and the Supervisory Board will propose to the 2008 Annual General Meeting that it approve a dividend payout of 0.53 euros
per preferred share and 0.51 euros per ordinary share
These results reflect both the strength of our corporate brand and the potency of our vision
to make people’s lives easier, better and more beautiful with our brands and technologies.
Our performance and achievements owe much to the capabilities and commitment of our
employees. Therefore, we would like to single them out especially at this juncture and thank
them for the contribution that they have made to the successes of fiscal 2007. Looking to the
future, we intend to continue investing in their training and qualifications, and to build on
their motivation, talents and flexibility.
2
Annual Report 2007
The Company
Preface
Dipl.-Ing. Albrecht Woeste
Prof. Dr. Ulrich Lehner
Annual Report 2007
3
Preface
People and brands are also the driving forces in our growth regions. Our businesses in Eastern
Europe, the Africa/Middle East region, Latin America and Asia all posted above-average growth.
Incremental recovery in the major Western European markets and our business results in the North
American consumer products market also contributed to our good performance. The successful
further development of the acquired Right Guard brands portfolio in the USA has been especially
instrumental in strengthening our position in the North American cosmetics market.
The disproportionately high rate of expansion achieved in Eastern Europe, the Middle East,
Latin America and Asia was accompanied by measures aligned to enhancing efficiency and
careful development of our brands. Innovations play an important role within this context. This
is one of the reasons why our successful innovation offensive launched in 2006 is to continue
through 2008, our aim being to assume the mantle of innovation leader in all our markets.
We also further streamlined our product portfolio in 2007, expanding our core operations
and shedding marginal activities in all three business sectors. And the acquisition of the
Adhesives and Electronic Materials businesses from National Starch planned for April 2008
is destined to make us even stronger.
Innovation prowess and sustainable development are to provide the basis for Henkel’s future.
Hence we are constantly scrutinizing our processes to ensure that they satisfy the sustainability criterion. We have long examined and continue to monitor the issue of how we generate
wealth and whether our actions in this regard are reconcilable with our corporate values.
We see this as part of our corporate social responsibility (CSR), to which we are dedicated
throughout the world.
Many rankings and awards demonstrate the fact that we are counted among the global corporate leaders in the field of CSR. We have been committed to this idea for many decades, and
we are working on solutions to the problems of our time – for example the advent of climate
change. It is against this background that we are endeavoring to optimize all our brands and
technologies in the three main phases in which their influence is felt, namely formulation,
manufacture and usage. Our adhesives are making modern automobiles lighter to reduce fuel
consumption and carbon dioxide emissions. And our modern laundry detergents and cleaning products are effective even at low temperatures, enabling households to decrease their
energy consumption. These are just some examples of many smart solutions from Henkel. The
impact of such innovations is, however, dependent on each and every individual behaving
responsibly and opting for the more sustainable alternatives in their buying decisions.
The success of our company is an important prerequisite for meeting our self-imposed CSR
ambitions. For only healthy businesses have a future, can employ people and are able to meet
their social and societal responsibilities. Hence we will again endeavor to further improve our
financial metrics in fiscal 2008. Our sales and our earning power have undergone significant
4
Annual Report 2007
Preface
increases, but there is still room for improvement in our return ratios. We intend to close the
gap with measures aimed at increasing the profitability of our core businesses, through the
introduction of new, innovative products, and through further internationalization.
As already mentioned, we expect early April 2008 to see the closing of our takeover of the
adhesives and electronic materials operations of National Starch, an excellent business with
The Company
outstanding employees and products. The fast and smooth integration of this, the largest
acquisition in our corporate history, will constitute an important milestone as we progress
forward.
Our aim for 2008 is once again to grow faster than our markets, and we expect to generate an
organic sales growth rate (after adjusting for foreign exchange and acquisitions/divestments)
of 3 to 4 percent. Our expectations with regard to both operating profit adjusted for foreign
exchange and earnings per preferred share are for an increase in excess of organic growth.
We would like to express our gratitude to the Supervisory Board and the Shareholders’
Committee for their carefully considered, constructive advice, with thanks also going to our
shareholders for their continuing confidence in us and for their support of our activities.
We also take this opportunity to thank Dr. Jochen Krautter who retired from the Henkel
Management Board in 2007. His 34-plus years of unwavering, exceptional and successful
commitment have been an example to us all.
Our special thanks also go to our customers worldwide for the loyalty and trust they have
shown in our company, our brands and our technologies. They are the foundation of our
success and it is to them that we dedicate this Annual Report entitled “Henkel – A World of
Customers”.
Sincerely yours,
Chairman of the Shareholders’
Chairman of the Management Board
Committee and of the
of Henkel KGaA
Supervisory Board of Henkel KGaA
Düsseldorf, January 31, 2008
Annual Report 2007
5
Report of the Supervisory Board
Dear Shareholders,
During the course of fiscal 2007, we carefully and regularly
The respective product innovations and product strategies
monitored the work of the Management Board as required
of the individual business sectors, and also questions of
by law and the corporation’s Articles of Association, advis-
research and development were discussed in conjunction
ing on the strategic further development of the corporation
with examination of the associated budgets and business
and on major individual measures and activities.
plans. The Management Board likewise provided us with
The basis for this was provided by the detailed reports
an overview of the financing situation of the corporation,
submitted in written and verbal form by the Manage-
the status and envisaged development of our pension
ment Board on relevant matters affecting the corpora-
obligations, and the assets assigned to Henkel Trust e.V.
tion and the primary affiliated companies. Explanations
for the purpose of covering these obligations.
were provided specifically of the business situation and
the development of the corporation, business policy,
Corporate Governance, Nomination Committee
profitability and short-term and long-term corporate,
Again in 2007, the Supervisory Board consulted on the
financial and personnel planning. In the course of the
issue of corporate governance. Discussions this time
quarterly reports, details were provided of the sales and
centered on the appointment of a joint stock entity as
profits of Henkel as a whole, with further analysis by
the sole personally liable partner, together with the as-
business sector and region. Outside Supervisory Board
sociated changes in the Articles of Association to be put
meetings, the Chairman of the Supervisory Board also
forward to the Annual General Meeting for its approval.
remained in regular contact with the Chairman of the
We have formed a Nomination Committee comprising
Management Board for the purpose of conferring on
three shareholder representatives in accordance with
current developments and major business events.
the recommendations of the German Corporate Governance Code as amended on June 14, 2007. With the
Meetings
advent of the new elections to the Supervisory Board
In fiscal 2007, the Supervisory Board met four times.
to take place during the 2008 Annual General Meeting,
In these meetings, we discussed in detail the reports
this committee has proposed suitable candidates to the
of the Management Board and consulted together with
Supervisory Board for its selection procedure.
the Management Board on the development of the
corporation and on strategic issues.
Efficiency Audit and Declaration of Compliance
We were substantially involved in the merger of the
In the meeting of February 19, 2008, we examined in detail
business sectors Consumer and Craftsmen Adhesives and
the efficiency of our own work on the basis of an extensive
Henkel Technologies to create the new business sector
and comprehensive checklist. There were no complaints
Adhesives Technologies effective April 1, 2007.
with respect to the efficiency of the activities of the Super-
A further area in which we consulted was the intended
visory Board or the independence of its members.
acquisition of the business segments Adhesives and Elec-
In this meeting, we likewise discussed and approved
tronic Materials from National Starch by way of a back-to-
the new joint Declaration of Compliance of the Manage-
back transaction with Akzo Nobel. As part of this process,
ment Board, the Shareholders’ Committee and the Su-
we also discussed in detail the strategy being followed by
pervisory Board with respect to the German Corporate
the business sector Adhesives Technologies, the special fea-
Governance Code for 2008. The full wording of the cur-
tures of this business and its commercial development.
rent and also the previous declarations of compliance
We also examined possibilities of optimizing the
can be found on the corporation’s website.
production structure, and consulted on the future development of the portfolio of the Cosmetics/Toiletries
Annual and Consolidated Financial Statements
business sector.
The annual financial statements and the management
report of Henkel KGaA have been prepared in accordance with German commercial law (HGB). The consoli-
6
Annual Report 2007
dated financial statements and the Group management
see no reason for reservation or objection in respect of
report have been prepared according to International
the financial statements presented. At our meeting of
Financial Reporting Standards (IFRS) as adopted by
February 19, 2008, we approved the annual financial
the European Union, supplemented by the provisions
statements, the consolidated financial statements and
under commercial law applicable according to §315a
the management reports as prepared by the personally
(1) of the German Commercial Code (HGB).
liable managing partner in consultation with the other
The auditors appointed for 2007 by the last Annual
members of the Management Board, and we endorsed
General Meeting – KPMG Deutsche Treuhand-Gesellschaft
the recommendation by the personally liable manag-
Aktiengesellschaft Wirtschaftsprüfungsgesellschaft
ing partner for appropriation of the profit of Henkel
(KPMG), Berlin, Germany – have examined the 2007 an-
KGaA. We also ratified our proposals for resolution to be
nual financial statements of Henkel KGaA and the 2007
presented before the Annual General Meeting. On this
consolidated annual financial statements including
occasion, we likewise discussed the scope, focal points
the management reports, together with the account-
and costs of the audit of the financial statements.
ing records from which they were prepared, and have
issued them with an unqualified opinion.
Risk Management
KPMG reports that the annual financial statements give
We also received detailed information on the risk man-
a true and fair view of the net assets, financial position and
agement system in place at Henkel, with quantification
results of operations of Henkel KGaA in accordance with
of major individual risks. Our considered opinion is that
generally accepted German accounting principles, and
there is no apparent evidence of any risks that could
that the consolidated financial statements give a true and
endanger the continued existence of the corporation
fair view of the net assets, financial position and results of
as a going concern. In the course of the year-end audit,
operations of the Group and of its cash flows for the year
KPMG likewise investigated the structure and function
under review, in compliance with International Financial
of the risk management system and found no cause for
Reporting Standards. KPMG further confirms that the
reservation. In our own view, too, the risk management
consolidated financial statements and Group management
system corresponds to the statutory requirements.
report for the year under review meet the requirements of
§315a (1) of the German Commercial Code (HGB).
All the documentation relating to the annual finan-
Membership of the Supervisory Board and of the
Management Board
cial statements and the recommendations by the per-
There were no changes in the composition of the Super-
sonally liable managing partner for the appropriation
visory Board in 2007. Effective June 30, 2007, Dr. Jochen
of profits, and also the audit reports of KPMG, were laid
Krautter resigned his position as personally liable partner
before each member of the Supervisory Board in good
on the Management Board in order to take retirement.
time. We examined these documents and discussed
The Supervisory Board thanks the Management
them at our meeting of February 19, 2008. This was
Board and all Henkel employees for their hard work
held in the presence of the auditors who reported on
and commitment in 2007.
their main audit findings. As in previous years, we also
convened on the preceding day in order to discuss in
Düsseldorf, February 19, 2008
detail with the auditors, the Chairman of the Management Board and the Chief Financial Officer all aspects
of the financial statements and the auditors’ reports
appearing to us to be of importance.
We received the audit reports and voiced our ac-
The Supervisory Board, Dipl.-Ing. Albrecht Woeste
(Chairman)
quiescence therewith. We concur with the auditors’
findings and, having concluded our own examination,
Annual Report 2007
7
The Company
Report of the Supervisory Board
Management Board
from left to right
Dr. Friedrich Stara
Prof. Dr. Ulrich Lehner1)
Executive Vice President Laundry & Home Care,
Chairman of the Management Board of Henkel
born 1949; with Henkel since 1976.
KGaA, born 1946; with Henkel since 1981
including an interim break of three years.
Dr. Lothar Steinebach
Executive Vice President Finance/Purchasing/IT/Law,
8
Annual Report 2007
1)
Personally Liable Managing Partner
Management Board
Kasper Rorsted
Hans Van Bylen
Executive Vice President Human Resources/
Executive Vice President Cosmetics/Toiletries,
Infrastructure Services, born 1962; with Henkel since
2005; Vice-Chairman of the Management Board since
Alois Linder
Executive Vice President Adhesives Technologies,
The Company
January 1, 2007.
Annual Report 2007
9
Successful with our Customers
The success of our customers in the retail, industrial
strial
and service segments is the focus off our activities. Our excellent partnership is
s founded on our
innovation capabilities. We investigate the needs
and desires of consumers
mers throughout
througho the world.
That means that, with our bra
brands and technolo-
gies, we are able to develop brand products and
unique services that distinguish us in the eyes of
uniqu
our customers. It is here that we see the main reason for Henkel’s 131-year success story – and for
our mutual success going forward.
Innovation Power
We safeguard our brands an
and technologies around the world with more than 7,000
invention patents and with a
around 2,500 registered designs protecting our creative
intellectual property.
rty.
Tailored Soluti
Tailore
Solutions
ns
Our system of ideally
ally matched quality products and serv
services creates added value for our cus
customers.
rs. And we
offer everything from
individual
om technical advice and support to ind
al process optimization.
Technological
hno ogica Know-How
now How
We define adhesives
custoves precisely in accordance with the requirements of our custo
mers, helping them
applicam to move ahead with efficiently engineered adhesive applica
tions.
A Leader in New Trends
All our innovation processes are aligned to identifying the wishes and requirements of
customers and consumers – even before they themselves are aware of them.
our c
10
Annual Report 2007
The Company
Professional Training
Each year, well over 100,000 customer employees from manufacturing, construction and the
e
maintenance, repair and overhaul trades attend our professional training courses, learning
how to make their work easier, more effective and more efficient with our products. Henkel
Cosmetics adopts a similar approach, each year training more than 200,000 professional
hairdressers in the late
latest techniques and trends affecting the hair salon segment.
Key Ac
K
Accounts
ount World
Worldwide
de
Large numbers
rs of majo
major industrial
trial custome
customers and retailers throughout the wo
world put their
heir faith in the constant,
excellent quality
services provided by Henkel. In 2007, ove
over 150,000
customers received
excell
lity of the products
ucts and ser
000 custo
products and services directly from Henkel. Many more were served by distributors.
Worldwide
Wo
dwide Pres
Presence
ce Globally T
Trusted
usted Brands
ds
We lea
lead the markets in over 125 countrie
countries with
h our
brands and technologies.
echnologies. And we employ 20,000
000
developpeople in marketing,
keting, sales, research and dev
pment.
Leading international br
brands such as P
Persil, Schwarzepitomize the
dence and loyalty
kopf and Loctite epitom
e confide
our customers
that we generate in o
mers and consumers.
Professional Advice
Our specialists are able to offer first-class ideas and know the answers to
even the most difficult questions. In order to be able to provide competent
and individual advice, we ensure that over 10,000 Henkel employees are
in daily contact with our customers.
Annual Report 2007
11
Top Brands
Top Brands
Laundry & Home Care
Heavy-duty detergents; fabric softeners; laundry conditioning products; dishwashing products; all-purpose
cleaners; scouring agents; floor and carpet care products; bath and toilet cleaners; glass cleaners; kitchen
cleaners; specialty cleaners; air fresheners and insecticides for household applications
Hair shampoos and conditioners; hair colorants; hair
styling and permanent wave products; toilet soaps;
shower gels and bath products; deodorants; skin creams;
skin care products; dental care and oral hygiene products; hair salon products
Our brands drive growth.
12
Annual Report 2007
The Company
Top Brands
Wallpaper pastes; ceiling, wall covering and tile adhesives; home decoration products;
sealants; polyurethane foam fillers; cyanoacrylates; contact adhesives; wood glues; assembly adhesives; PVC pipe adhesives; flooring adhesives; waterproofing products; thermal insulation products; coatings; roofing products; glue sticks; glue rollers; correction
products; adhesive tapes; industrial adhesives and sealants; surface treatment products;
industrial cleaning agents; resins; soldering pastes; lubricants; preformed parts
Our brands excel through innovation,
quality and trust. With them we create
added value for our customers.
Annual Report 2007
13
Innovations
2006, 2007, 2008 –
Years of Innovation
Let’s Innovate!
At the beginning of 2006, Henkel launched a three-year
innovation offensive under the slogan “Let’s Innovate!”.
During the first year, the focus was on increasing the
awareness of all our employees of the importance of
innovation. The core message was that every individual
– regardless of their function and position – must help
make Henkel more innovative. Henkel people around
Laundry & Home Care
the world submitted more than 90,000 ideas and our
innovation pool is brim full.
100 Years of Persil
To mark its centennial, Persil was made better than
In 2007, the emphasis was on simplifying, standardizing
ever: new formulation with unique active stain remover,
and optimizing the processes initiated in 2006 so that
new packaging for the liquid format and new brand
the right innovation projects could be nucleated from
design, winner of several prestigious awards.
the abundance of ideas submitted. Now the “Henkel
Inno Gate” process has been established for this very
Somat 7
purpose. It comprises all our innovation activities –
Somat 7 contains not only a cleaning detergent, clear
from the initial idea through concept development and
rinse substance, salt function, stainless steel shine
on to the market launch and monitoring phases. This
enhancer and glass protection agent but now also a
means that, right across the corporation, our innova-
cleaning intensifier and a low-temperature activator
tion projects are properly transparent, enabling them
effective at just 40°C.
to be more systematically analyzed and prioritized.
Purex UltraConcentrate Natural Elements
In 2008, the focus will be on the extensive utilization of
This environmentally compatible concentrate with
our innovation potential and on increasing the efficiency
ingredients provided by nature saves on packaging and
and efficacy of the ideas management process in order
weight, making it easier to handle.
ultimately to enhance quality and increase our innovation
rate. We also intend to intensify our external collaboration
activities in the belief that the future lies in project-based
cooperation. The guiding principle is to acquire knowledge from whatever sources come to light.
Innovations drive growth.
We also want to be perceived by the public as a leader in
innovation, our objective being to generate 30 percent
of our sales with brand products that are younger than
three to five years old.
14
Annual Report 2007
The Company
Innovations
Gliss Kur Oil Nutritive
Loctite 5610
The first Gliss Kur line with rich argan and shea oils.
Temperature-resistant two-pack silicone adhesive offer-
It imparts visibly more shine to long hair and reduces
ing fast curability to optimize the production processes
split ends by up to 95 percent.
of our customers. Particularly suitable for the bonding
of glass ceramic stove tops, microwave doors and bak-
Fa Natural & Pure and Fa Natural & Soft
ing ovens.
The first natural body wash line from Fa with fragrant
essences and care vitamins from nature’s store.
Pattex PL600 INSTANT TACK assembly adhesive
High initial adhesion and final strength, quick and
Taft Volume Power
simple to prepare and apply, universally suitable for
The first hair styling series with the “push-up” effect
internal and external applications, and easy to use even
for visibly more volume and bounce.
at low temperatures.
Dorus FD 150/6 LS
This innovative adhesive for the manufacture of highgloss kitchen furniture improves the quality and efficiency of the production processes of our customers.
Our innovations satisfy ever-changing requirements.
With them, we are able to open the door to
new market segments for
our customers.
Annual Report 2007
15
Shares and Bonds
Shares and Bonds
» Share split implemented in the ratio 1:3
» Henkel shares reach historic high
» Share liquidity increased
» Growing international shareholder
Following two years of above-average increases, the price
of Henkel shares rose once again in 2007. With a closing
price of 38.43 euros, the preferred share improved by a
further 3.4 percent compared to the prior-year figure,
structure
while the ordinary share gained 6.8 percent, ending
the year at 34.95 euros. This means that, again in fiscal
In order to further increase the liquidity and attrac-
2007, we achieved one of our most important corporate
tiveness of Henkel shares, particularly for private
objectives, namely that of long-term value creation to
investors, we implemented a change in the quota-
the benefit of our investors.
tion for both our ordinary and preferred shares on
Back in January, the preferred share reached a pro-
June 18, 2007, splitting both classes in the ratio 1:3
visional historic high of 40.15 euros. Following publi-
as approved by the Annual General Meeting of April
cation of the figures for fiscal 2006, which fell below
16, 2007.
the expectations of the capital market, the share price
HENKEL PREFERRED SHARE PERFORMANCE VERSUS MARKET IN 2007
in euros1)
50
37.16 euros
December 29, 2006
38.43 euros
December 28, 2007
40
Henkel preferred share
DAX (indexed)
DJ Euro Stoxx Consumer
Goods (indexed)
30
February 1, 2007:
Publication
of preliminary
results for 2006
February 27, 2007:
Publication of 2006
Annual Report
May 2, 2007:
Publication
of results for
Q1 2007
August 13, 2007:
Signing of back-to-back agreement
on National Starch businesses
August 1, 2007:
Publication
of results for
Q2 2007
November 7, 2007:
Publication
of results for
Q3 2007
January 2007
December 2007
HENKEL PREFERRED SHARE PERFORMANCE VERSUS MARKET 1998 – 2007
in euros1)
38.43 euros
December 28, 2007
50
18.95 euros
December 30, 1997
22.07 euros
December 30, 1999
30
21.17 euros
December 29, 2001
20.67 euros
December 30, 2003
28.33 euros
Dec. 30, 2005
Henkel preferred share
10
DAX (indexed)
DJ Euro Stoxx Consumer Goods (indexed)
January 1998
1)
16
Annual Report 2007
December 2007
Shares and Bonds
KEY DATA ON HENKEL SHARES 2003 – 2007
in euros1)
2003
2004
2005
2006
2007
Ordinary share
1.43
1.73
1.75
1.97
2.12
Preferred share
1.45
1.75
1.77
1.99
2.14
Ordinary share
19.43
20.30
26.18
32.73
34.95
Preferred share
20.67
21.33
28.33
37.16
38.43
Ordinary share
20.30
22.67
26.18
33.14
37.50
Preferred share
21.45
24.53
28.37
37.82
41.60
Ordinary share
14.63
17.50
20.32
25.66
29.96
Preferred share
16.48
18.67
21.46
28.21
33.70
Earnings per share in accordance with IFRS2)
High for the year3)
Low for the year3)
Dividends
Ordinary share
0.38
0.41
0.43
0.48
0.514)
Preferred share
0.40
0.43
0.45
0.50
0.534)
Market capitalization
in billion euros
8.7
9.1
11.8
15.1
15.9
Ordinary share
in billion euros
5.0
5.3
6.8
8.5
9.1
Preferred share
in billion euros
3.7
3.8
5.0
6.6
6.8
3)
1)
2)
comparable; 2004 restated and comparable
3)
closing share prices, Xetra trading system
4)
proposed
decreased in February and, at 33.70 euros in mid March,
average at 288,200 per trading day was around double
reached its lowest mark for the year. After a recovery
the total of the previous year. The market capitalization
in the quoted prices during the following months and
of our ordinary and preferred shares increased from
attainment of a new historic high of 41.60 euros at the
15.1 billion euros to 15.9 billion euros.
beginning of July, share performance in the course of
Shareholders who invested 1,000 euros when
the second half of the year initially softened, as did the
Henkel’s preferred shares were issued in 1985, and then
overall market. From the middle of August and espe-
reinvested the dividends received (excluding taxes) in
cially following publication of our figures for the third
the stock, would have had a portfolio value of about
quarter at the beginning of November, the price of our
11,200 euros by the end of 2007. This represents an
shares began again to head in an upward direction.
investment growth rate of 1,020 percent or an average
Nevertheless, the performance of the preferred
yield of 11.5 percent per year. Over the same period,
share, as seen across the year, lagged behind the DAX
DAX tracking would have provided an annual yield of
index, which grew by 22.3 percent. Also in comparison
9.2 percent.
with the industry benchmark, the Dow Jones Euro
Stoxx Consumer Goods index, which rose by 16.6 per-
Henkel Shares Listed in all Major Indexes
cent compared to the prior-year figure, the showing of
Henkel shares are predominantly traded on the Xetra
our preferred share was weaker.
electronic market of the Frankfurt Stock Exchange.
Fiscal 2007 saw a further increase in the trading
Henkel is also represented on the floor of this and the
volumes of our shares, with 1.7 million preferred shares
other regional stock exchanges in Germany. In the USA,
on average changing hands every trading day (previous
investors are able to acquire Henkel preferred and or-
year: 1.2 million). In the case of our ordinary shares, the
dinary shares by way of stock ownership certificates
Annual Report 2007
17
The Company
Share price at year-end3)
Shares and Bonds
obtained through the Sponsored Level I ADR (American
Depositary Receipt) program. The number of ADRs representing ordinary and preferred shares outstanding
INSTITUTIONAL INVESTORS
HENKEL PREFERRED SHARES BY REGION
Rest of World 8 %
USA 27 %
at the end of the year increased to around 9.0 million
(end of 2006: 5.7 million).
Rest of Europe 22 %
The international significance of Henkel preferred
shares derives not least from their inclusion in major
indexes that serve as important indicators for the capi-
France 8 %
tal markets and as benchmarks for fund managers.
As a DAX stock, Henkel counts among the 30 most
Germany 14 %
UK 21 %
Source: Thomson Financial
important listed corporations in Germany. At the end
of 2007, the market capitalization of the DAX-relevant
preferred shares was 6.8 billion euros, placing Henkel
Vermögensverwaltung GmbH & Co. KG, Hamburg, Ger-
at number 25 in the DAX rankings; in terms of trad-
many, sold a major portion of its 6.11 percent participa-
ing volumes, Henkel was 28th on the list. Our DAX
tion in ordinary shares previously held. Aside from the
notifications received from the members of the Henkel
family, we have no further notices of disclosure from
SHARE DATA
Preferred
Ordinary
other shareholders indicating a notifiable shareholding
in excess of 3 percent of the voting shares.
Security Code No.
604843
604840
ISIN Code
DE0006048432
DE0006048408
Stock Exch. Symbol
HEN3.ETR
HEN.ETR
– the significantly more liquid class of stock – is wholly
Number of Shares
178,162,875
259,795,875
diversified. Around 60 percent of these shares are
The ownership pattern of our preferred shares
owned by institutional investors with globally spread
weighting is 0.86 percent. The Henkel preferred share
shareholdings.
is further included in the international indexes MSCI
Around 7.5 million preferred shares have been re-
Europe, Dow Jones Stoxx 600 and FTSE World Europe.
purchased in the past by Henkel KGaA for the corpora-
On June 18, 2007, the Henkel preferred share was also
tion’s Stock Incentive Plan. As of December 31, 2007,
incorporated within the Dow Jones Titans 30 Personal
our treasury stock amounted to 5.0 million preferred
& Household Goods index comprising the thirty most
shares.
important companies operating in the personal and
household goods category worldwide.
Employee shares in high demand
In addition to the ethical indexes Dow Jones Stoxx
Since 2001, Henkel has been operating a share owner-
Sustainability and FTSE4Good, the Henkel preferred
ship plan for all employees worldwide, known as the
share has, since September 24, also been part of the
Employee Share Program or ESP. For each euro invested
Dow Jones Sustainability World index, which in sus-
by an employee (limited to 4 percent of salary up to
tainability terms makes Henkel a global leader in our
a maximum of 4,000 euros per year), Henkel added
sector.
an additional 33 cents in the year under review. The
number of participants in this plan increased once
International shareholder structure
again in 2007, with some 11,000 employees in around
According to notices of disclosure received by the com-
50 different countries buying Henkel shares. At year-
pany, the Henkel family owns a majority of the ordinary
end, 14,100 employees held a total of 3.3 million shares
shares amounting to 51.48 percent. In June 2007, Jahr
within the ESP, representing around 1.8 percent of
18
Annual Report 2007
Shares and Bonds
total preferred shares outstanding. The vesting period
to talk directly with our top management. In addition,
for newly acquired shares is three years.
there were numerous telephone conferences and oneon-one meetings – amounting to more than 500 events
Henkel Bonds
Henkel is represented in the international bond mar-
Moreover, we provided investors and analysts with
kets by two bonds with a total volume of 2.3 billion
specific insights into our operating business sectors.
euros.
At the Analyst and Investor Meeting held in Düsseldorf
on February 27, 2007, we focused both on the 100th
BOND DATA
anniversary of Persil and on the merger of Consumer
Senior Bond
Hybrid Bond
and Craftsmen Adhesives and Henkel Technologies to
Volume
1.0 bn euros
1.3 bn euros
create the new business sector Adhesives Technologies.
Nominal Coupon
4.25 %
5.375 %
At our conference in Munich on November 7, 2007, we
Coupon Payment Date
June 10
November 25
provided information on the planned acquisition and
Maturity
June 10, 2013
Nov. 25, 21041)
integration of the business segments Adhesives and
Listing
Frankfurt
Luxembourg
Security Code No.
664196
A0JBUR
ISIN Code
DE0006641962
XS0234434222
1)
Electronic Materials of National Starch. Future-aligned
innovations in the area of adhesives, sealants and surface treatment were also presented on this occasion
first call option for Henkel on November 25, 2015
at our Technology Center in neighboring Garching.
On November 26, 2007, the date of the “British HairIn May 2003, Henkel KGaA issued a senior bond for 1.0
dressing Awards”, we gathered in London to provide
billion euros. This is also described as a benchmark
an overview of the latest developments to come out of
bond because, due to its large volume and its liquidity,
our Cosmetics/Toiletries business.
it provides a good yardstick for the market’s assessment
of Henkel’s creditworthiness.
In November 2005, Henkel issued a subordinate
Private investors are able to obtain all relevant information through telephone inquiry or at the Investor Relations website at www. henkel.com/ir. This also
hybrid bond in the amount of 1.3 billion euros. The
proceeds of the bond were allocated to a special CTA
ANALYST RECOMMENDATIONS
(Contractual Trust Arrangement) for the purpose of
financing a major portion of the company’s pension
Buy 48 %
Sell 16 %
obligations in Germany.
Further detailed information regarding these bonds,
the current developments of their respective prices and
the associated risk premium (credit margin) can be
found on our website (www.henkel.com/bonds).
Hold 36 %
Committed to Capital Market Communication
as per December 31, 2007; basis: 28 financial analysts
Henkel places great importance on meaningful dialog
with both investors and financial analysts. In more
serves as the medium for the live broadcast of telephone
than 30 capital market conferences and roadshows held
and analyst conferences, plus the Annual General Meet-
in Europe and North America, institutional investors
ing, the latter also offering the possibility of obtaining
and financial analysts were afforded the opportunity
extensive information from Henkel’s management.
Annual Report 2007
19
The Company
in all.
Shares and Bonds
The quality with which capital market communications
are conducted is evaluated by independent ranking
organizations, and our Investor Relations team again
received a number of accolades in 2007. For example, in
the Investor Relations Awards conferred by Germany’s
“Capital” magazine, Henkel took fourth place among
the DAX companies. And our Investor Relations team
also garnered top positions in various comparisons
with European corporations in the Home & Personal
Care category.
Henkel Shares and Bonds Monitored
by Numerous Financial Analysts
Henkel is tracked by a number of financial analysts –
primarily in Germany, the UK and the USA. Over 40
analysts regularly publish studies and commentaries
on current developments at the company.
You will find a Financial Calendar with all our important dates on the inside back cover of this Annual
Report.
20
Annual Report 2007
Group Management Report: Corporate Governance
Corporate Governance at Henkel KGaA
Corporate Governance in the sense of responsible,
a hybrid of a joint stock corporation and a limited com-
transparent management and control of the company
mercial partnership. It is predominantly governed by
aligned to the long-term increase in shareholder value
the German Joint Stock Corporation Act (AktG).
has long been an essential component of our corpoDivision of the Capital Stock, Shareholder Rights
Consequently, the Management Board, Sharehold-
Following implementation of the share split in the
ers’ Committee and Supervisory Board have commit-
ratio 1:3 as approved by the Annual General Meeting
ted to the following principles:
of April 16, 2007, the capital stock of the corporation
» Value creation as the foundation of our managerial
amounts to 437,958,750 euros. It is divided into a total
approach
» Sustainability as a criterion for responsible management
» Transparency underpinned by an active and open
information policy
of 437,958,750 bearer shares of no par value (share
certificates), of which 259,795,875 are ordinary shares
(proportion of capital stock: 259,795,875 euros or 59.3
percent) and 178,162,875 preferred shares (proportion
of capital stock: 178,162,875 euros or 40.7 percent).
Each ordinary share grants to its holder one vote.
I. Corporate Governance Report
The preferred shares accord to their holder all shareholder rights apart from the right to vote. Unless other-
This Corporate Governance Report describes the prin-
wise resolved in General Meeting, the unappropriated
ciples of the management and control structure and
profit is distributed as follows: first, the holders of
also the essential rights of shareholders of Henkel
preferred shares receive a preferred dividend in the
KGaA; in addition, it explains the special features that
amount of 0.04 euros per preferred share. The holders
arise from our particular legal form and our Articles of
of ordinary shares then receive a dividend of 0.02 euros
Association as compared to a joint stock corporation.
per ordinary share, with the residual amount being
It takes into account the recommendations of the Ger-
distributed to the holders of ordinary and preferred
man Corporate Governance Code and contains all the
shares in accordance with the proportion of the capital
information required according to §289 (4) and §315
stock attributable to them (Article 35 of the Articles
(4) of the German Commercial Code (HGB).
of Association). Cancellation or limitation of this preferred dividend requires the consent of the holders of
Legal Form
preferred shares. If the preferred dividend is not paid
Henkel is a “Kommanditgesellschaft auf Aktien” (KGaA),
out either in part or in whole in a year, and the arrears
i.e. a partnership limited by shares and incorporated
are not paid off in the following year together with the
under German law. Like a German “Aktiengesellschaft”
full preferred share dividend for that second year, the
(AG) [joint stock corporation], a KGaA is a company with
holders of preferred shares are accorded voting rights
its own legal personality (i.e. it is a legal person). Unlike
until such arrears are paid.
an AG, it has two classes of shareholder or “partner”. At
The shareholders exercise their rights in the Annual
least one partner assumes unlimited liability in respect
General Meeting as per the relevant statutory provi-
of the company’s creditors (personally liable partner).
sions and the Articles of Association of Henkel KGaA. In
The other partners participate in the capital stock,
particular, they may vote (as per entitlement), speak on
which is split into shares, and their liability is limited
agenda items, ask questions and propose motions.
by these shares (limited partners). A KGaA is therefore
Annual Report 2007
21
The Company
rate culture, and will remain so into the future.
Approved Capital, Share Buy-back
Major Shareholders
According to Art. 6 (5) of the Articles of Association,
According to notifications received by the company
there is an authorized capital limit. Acting within this
on July 8, 2004, a total of 51.48 percent of the voting
limit, the personally liable partners are authorized, sub-
rights are held by parties to the Henkel family’s share-
ject to the approval of the Supervisory Board and of the
pooling agreement. This agreement was concluded
Shareholders’ Committee, to increase the capital stock
between members of the families of the descendants of
of the corporation in one or several acts until April 9,
company founder Fritz Henkel; it contains restrictions
2011, by up to a total of 25,600,000 euros through the
with respect to transfers of the ordinary shares covered
issue for cash of new preferred shares with no voting
(Art. 7 of the Articles of Association).
rights. All shareholders are essentially assigned preemptive rights. However, these may be set aside pro-
Management Board/Supervisory Board/
vided that the issue price of the new shares is not sig-
Shareholders’ Committee
nificantly below the quoted market price of the shares
At Henkel KGaA, the duties of the Board of Directors
of the same class at the time of final stipulation of
of a German joint stock corporation are performed by
the issue price, and also when disposing of fractional
the Management Board. This comprises the personally
amounts of shares. This ensures that the company can
liable partner(s) plus other duly appointed members,
cover any future capital requirements, even at short
and is headed by a Chairman (§278 (2), §283 of the
notice, while still adequately safeguarding the interests
German Joint Stock Corporation Act (AktG) in conjunc-
of existing shareholders.
tion with Art. 11 of the Articles of Association).
In addition, the personally liable partners are autho-
In accordance with Germany’s Codetermination
rized to purchase ordinary and/or preferred shares of
Act of 1976, Henkel also has a Supervisory Board with
the corporation at any time up to October 15, 2008,
16 members made up of an equal number of share-
subject to the condition that the shares acquired on
holder and employee representatives. Its purpose is to
the basis of such authorization, together with the other
advise and to monitor the Management Board in its
shares that the corporation has already acquired and
stewardship of the corporation.
holds as treasury stock, shall not at any time exceed
According to the Articles of Association, in addition
10 percent in total of the capital stock. This authori-
to the Supervisory Board, Henkel also has a standing
zation can be exercised for any legal purpose. To the
Shareholders’ Committee which, in lieu of the General
exclusion of the pre-emptive rights of existing share-
Meeting, engages in the management of the corpora-
holders, treasury stock may be used to operate the
tion, appoints and dismisses personally liable partners,
Stock Incentive Plan of the Henkel Group. The shares
appoints and dismisses the Chairman of the Manage-
may be transferred to third parties for the purpose of
ment Board and the other members of the Management
acquiring companies or participating in companies.
Board, and regulates their legal relationships (§278
Treasury stock may also be sold to third parties against
(2) AktG in conjunction with §114 and §161 HGB and
payment in cash, provided that the selling price is not
Art. 8, 11 and 26 of the Articles of Association). Major
significantly below the quoted market price at the time
management activities such as significant acquisitions,
of share disposal. Through this authorization, the cor-
investments, divestments, financial and personnel
poration is in a position to realize the advantages as-
measures require the approval of the Shareholders’
sociated with the acquisition of treasury stock to the
Committee.
benefit of the corporation and its shareholders, while
adequately safeguarding the assets and investment
interests of shareholders.
22
Annual Report 2007
The Shareholders’ Committee has established a Finance
resented (Art. 24 of the Articles of Association). This
and also a Human Resources Subcommittee drawn
also applies to changes in the Articles of Association;
from among its members. The Finance Subcommit-
modifications to the object of the company require a
tee deals principally with the financial matters, ac-
three-quarters’ majority (§179 (2) AktG).
and accounting policy, and the internal audit and risk
management of the corporation. The Human Resources
II. Application of the German Corporate
Governance Code
Subcommittee deals principally with preparatory personnel matters relating to the Management Board,
Notwithstanding the special features arising from its
human resources strategy, and remuneration.
legal form and Articles of Association, Henkel KGaA
The Management Board, the Shareholders’ Commit-
complies with the main recommendations (“shall”
tee and the Supervisory Board work closely together for
provisions) of the German Corporate Governance Code,
the good of the corporation. The Management Board
with two exceptions: in order to protect the legitimate
agrees the strategic direction of the corporation with
interests and private spheres of the members of the
the Shareholders’ Committee, and the two bodies regu-
corporate bodies who are also members of the Henkel
larly consult on progress in its implementation.
family, their individual shareholdings are not disclosed
Some members of the Supervisory Board and of
unless required by other statutory obligations. The
the Shareholders’ Committee are or were in the past
Code requires disclosure of shareholdings in excess of
holders of leading positions in other companies. To
1 percent. Moreover, the members of the Nomination
the extent that Henkel transacts business with these
Committee of the Supervisory Board receive no addi-
companies, dealings are conducted in strict compli-
tional remuneration.
ance with the arm’s length principle. In our view, the
Henkel also complies with all the suggestions (“may/
independence of the members concerned is not affected
should” provisions) of the Code. The corresponding
by such relations.
declarations of compliance can be found on our website
at www.henkel.com/ir.
General Meeting
In accordance with the Declaration of Compli-
The General Meeting of Henkel KGaA essentially has
ance, the following details are disclosed in relation to
the same rights as the shareholders’ meeting of a Ger-
notifiable shareholdings: The aggregate shares held by
man joint stock corporation (AG). In addition, it votes
the members of the Supervisory Board and the Share-
on the adoption of the annual financial statements of
holders’ Committee exceed in both cases 1 percent of
the corporation and the appointment of members of
the shares issued by the corporation. The aggregate
the Shareholders’ Committee, formally approves the ac-
shareholding of the members of the Management
tions of the Shareholders’ Committee Members. Numer-
Board is less than 1 percent of the shares issued by
ous resolutions passed in General Meeting, such as the
the corporation.
adoption of the annual financial statements, require
the approval of the personally liable partner(s).
In fiscal 2007, members of the Management Board,
Supervisory Board and Shareholders’ Committee or
Unless otherwise required by mandatory provisions
persons closely related to them notified 20 transactions
of statute or the Articles of Association, the resolutions
per §15a WpHG (Securities Trading Act, “Directors’
of the General Meeting are adopted by simple major-
Dealings”). Of these transactions, one involved the pur-
ity and, inasmuch as a majority of shares is required
chase of preferred shares and five the sale of preferred
by statute, by simple majority of the voting stock rep-
shares with share numbers ranging between 35 and
Annual Report 2007
23
The Company
counting issues including the year-end audit, taxation
20,753; ten of these transactions related to swaps of
There are also rules that go beyond the legal require-
preferred and ordinary shares involving share numbers
ments, governing the behavior of the members of the
of between 933 and 166,946. In addition, four put and
Board of Management, the Shareholders’ Committee
call options were exercised with respect to 110,000
and the Supervisory Board, and also employees of the
preferred shares and 120,000 ordinary shares.
corporation who, due to their function or involvement
For further details in this regard, and also in rela-
in projects, have access to insider information.
tion to corporate governance in general, please go to
our website at www.henkel.com/ir.
IV. Remuneration Report
III. Corporate Compliance
This Remuneration Report provides an outline of the
compensation system for the Management Board, the
Henkel is committed to ensuring that all business trans-
Supervisory Board and the Shareholders’ Committee of
actions are conducted in an ethically irreproachable,
Henkel KGaA, and also indicates the level and structure
legal fashion. In order to maintain compliance in this
of the remuneration paid.
regard, the Management Board has introduced a range
It takes into account the recommendations of the
of binding rules and regulations in the form of vari-
German Corporate Governance Code and contains all
ous codes, standards and directives which are regularly
the information required according to the provisions
reviewed and revised where appropriate. These rules
of the German Commercial Code (HGB) as amended by
also cover the procedures to be adopted in the event of
the Disclosure of Management Remuneration Act; this
complaints or suspicion of malpractice. In addition to
information has therefore not been repeated in the
our internal reporting system and complaint registration
Notes to the Consolidated Financial Statements.
channels, employees may also, for the purpose of reporting serious violations, use a Compliance Line operated
1. Remuneration of the Management Board
by an external service-provider.
Given the increasing requirements and growing com-
Regulation
plexities characterizing this sphere, Henkel has now
The remuneration of the members of the Management
merged the previously decentrally managed compliance
Board is regulated by the Human Resources Subcommit-
functions and appointed a Chief Compliance Officer
tee of the Shareholders’ Committee, which regularly
(CCO). The CCO is responsible for compliance-related
reviews the compensation system in terms of structure
activities undertaken at the corporate level, monitors
and amounts involved. In so doing, it takes into account
the degree of fulfillment of both internal and external
the size and international activities of the corporation,
regulations, reports on findings in this respect and sup-
its economic position and the level and structure of
ports the corporation in the further development and
remuneration in similar companies in order to ensure
implementation of the associated standards, assisted by
the competitiveness of the compensation package.
the Internal Audit unit which reports to said CCO.
Our corporate compliance activities are focused
Structure and Amounts
on the fields of safety, health and the environment,
In accordance with the objective of achieving a continu-
antitrust law and the fight against corruption. Further
ous and sustainable increase in shareholder value, the
compliance-relevant areas relate to capital market law.
remuneration of the Management Board is character-
In addition to the legal provisions, internal codes of con-
ized by a high proportion of performance-related com-
duct have been put in place to regulate the treatment
pensation. The package comprises three components: a
of information with the potential to affect share prices.
fixed salary, a variable performance-related short-term
24
Annual Report 2007
cash payment (short-term incentive/STI) and a variable
a blocked custody account with a five-year drawing
performance-related long-term incentive (LTI) in the
restriction.
form of a share-based payment. Added to these emolu-
In the event of an absolute rise in the share price
ments are ancillary benefits and earnings-linked pen-
during the performance period of at least 15 percent,
sion entitlements. The components in detail:
21 percent or 30 percent, each participant is allocated
respectively. To calculate the share price increase, the
The amount of fixed salary is determined on the basis
average price in January of the tranche issue year is
of the functions and responsibilities of the recipients
compared to the average price in January of the third fi-
concerned, their time of tenure as members of the
nancial year following the issue year (reference price). If,
Management Board, and prevailing market conditions.
during the performance period, earnings per preferred
It is paid on a monthly basis.
share increase by at least 15 percent, 21 percent or
30 percent, each participant is allocated a further 1,800,
Short-term Incentive (STI)
3,600 or 5,400 CPUs respectively. To calculate the in-
The performance criteria governing the short-term in-
crease in earnings per preferred share (EPS), the EPS of
centive are primarily return on capital employed (ROCE)
the financial year prior to the year of issue is compared
and earnings per preferred share (EPS). The individual
to that of the second financial year following the year
performance of the Management Board member con-
of issue. The calculation is based on the approved and
cerned, and the size, significance and development of
endorsed consolidated financial statements of the re-
the business/management sector(s) involved are also
spective financial years as duly audited and provided
taken into account. Payment is made in arrears on an
with an unqualified opinion, whereby EPS is also ad-
annual basis as a function of the performance achieved
justed for exceptional items. The monetary value per
in the immediately preceding financial year.
Cash Performance Unit essentially corresponds to the
reference price of the Henkel preferred share. A ceiling
Long-term Incentive (LTI)
value (cap) is imposed in the event of extraordinary
Each member of the Management Board is allocated,
share price increases.
as a function of the absolute increase in the price of
the Henkel preferred share and the increase in the
Other Emoluments
earnings per Henkel preferred share (EPS) achieved
The other emoluments largely relate to benefits arising
over a period of three years (performance period), the
out of standard insurance policies and the provision
cash equivalent of up to 10,800 preferred shares – so-
of a company car.
called Cash Performance Units – per financial year
(= tranche). The number of shares takes into account
Other Regulatory Provisions
the split in the ratio of 1:3 implemented in 2007 and
The contracts of employment of the members of the
is equivalent to 3,600 old shares. On expiry of the per-
Management Board do not contain any specific provi-
formance period, the number and the value of the
sion for severance pay in the event of premature ter-
Cash Performance Units due are determined and the
mination of the employment relationship.
resulting tranche income is paid in cash. Each member
In the event of members of the Management Board
of the Management Board participating in the tranche
taking retirement, they are entitled to continued pay-
is required to acquire a personal stake by investing in
ment of their remuneration for a further six months,
Henkel preferred shares to the value of 25 percent of
but not beyond the month of their 65th birthday.
the gross tranche payout, and to place these shares in
Annual Report 2007
25
The Company
1,800, 3,600 or 5,400 Cash Performance Units (CPUs)
Fixed Salary
The corporation maintains on behalf of members of
Performance Units granted to the members of the Man-
corporate bodies and employees of Henkel a third-party
agement Board for 2007 as LTI, which become payable
group insurance policy (D&O insurance) protecting
in 2010 as a function of the degree of attainment of the
against consequential loss, which policy also covers
associated performance targets. It is a legal requirement
members of the Management Board. An appropriate
that a value be disclosed in the year of grant, and this
own-risk deductible has been set with respect to the
value has been calculated based on an assumed increase
members of the Management Board.
of both parameters (EPS/share price) of 21 percent over
the performance period, giving an imputed amount of
Remuneration in 2007
1,908k euros (2006: 1,605k euros).
The total compensation paid to members of the Man-
The remuneration of the individual members of the
agement Board for the performance of their duties for
Management Board for the year under review are indicated
and on behalf of Henkel KGaA and its subsidiaries dur-
in the table below together with a breakdown according
ing the year under review amounted to 16,219k euros
to the individual components referred to above.
(2006: 15,246k euros). Of the total cash emoluments
The remunerations of the personally liable man-
of 14,310k euros (2006: 13,641k euros) paid in respect
aging partners are subject to turnover tax (VAT). As a
of 2007, 4,128k euros was in fixed salary (2006: 3,948k
deductible input tax, this represents no net burden
euros), 9,969k euros for the STI (2006: 9,423k euros) and
for Henkel KGaA. Therefore, the tax amounts have not
213k euros in other emoluments (2006: 271k euros).
been included in the above data.
Also included in the total remuneration are the Cash
REMUNERATION OF THE MANAGEMENT BOARD
Cash components
in k euros
Fixed
salary
Short-term
incentive
Other
emoluments
Total cash
emoluments
Total
Value of longterm incentive1) remuneration1)
2007
900.0
2,286.3
38.3
3,224.6
151.2
3,375.8
2006
768.0
2,002.5
49.0
2,819.5
198.72)
3,018.22)
Dr. Jochen Krautter
2007
300.0
705.0
13.5
1,018.5
56.7
1,075.2
(until June 30, 2007)
2006
546.0
1,305.0
39.3
1,890.3
127.92)
2,018.22)
Alois Linder
2007
600.0
1,427.5
20.7
2,048.2
340.1
2,388.3
2006
546.0
1,205.0
42.0
1,793.0
255.7
2,048.7
2007
576.0
1,407.5
68.6
2,052.1
340.1
2,392.2
255.7
2,053.4
Kasper Rorsted
2006
516.0
1,235.0
46.7
1,797.7
Dr. Friedrich Stara
2007
576.0
1,377.5
34.9
1,988.4
340.1
2,328.5
2006
516.0
1,235.0
37.3
1,788.3
255.7
2,044.0
2007
600.0
1,387.5
20.4
2,007.9
340.1
2,348.0
2006
546.0
1,235.0
27.5
1,808.5
255.7
2,064.2
Hans Van Bylen
2007
576.0
1,377.5
16.9
1,970.4
340.1
2,310.5
2006
510.0
1,205.0
28.7
1,743.7
255.7
1,999.4
Total
2007
4,128.0
9,968.8
213.3
14,310.1
1,908.4
16,218.5
25.5 %
61.5 %
1.3 %
11.7 %
100.0 %
Total
20063)
3,948.0
9,422.5
270.5
13,641.0
1,605.1
15,246.1
25.9 %
61.8 %
1.8 %
10.5 %
100.0 %
1)
2007 LTI payout in 2010; these figures will only be attained in the event of EPS/share price increasing by 21 percent in the performance period
2)
2006/2007 LTI calculated for Messrs. Lehner/Krautter only up to time of departure in 2008/2007 respectively
3)
after adjusting for changes that took place in 2006
26
Annual Report 2007
Pension Benefits
of a certain percentage of the fixed salary and of the
The retirement pension for members joining the Man-
short-term incentive, this percentage being the same for
agement Board before January 1, 2005 amounts to a
all members of the Management Board. Any vested pen-
certain percentage of the last paid fixed salary (defined
sion rights earned within the corporation prior to the
benefit). For these Management Board members, the
executive’s joining the Management Board are taken
amount payable is set at 60 percent of the final fixed
into account as start-up units. This ensures the estab-
salary in the event of retirement after their 62nd birth-
lishment of a performance-related pension system.
day. The actual percentage individually determined
The pension benefits or contributions to pensions
for each executive is made up of two components: the
in the period under review accruing to the members
so-called base percentage rate derived from the vested
of the Management Board as of the balance sheet date
pension entitlement earned prior to entry into the
are shown in the tables below.
Management Board, and an annual percentage increase
A total of 61,878k euros (2006: 61,177k euros) has
of the base percentage during the executive’s member-
been provided for pension obligations to former mem-
ship of the Management Board.
bers of the Management Board of Henkel KGaA and
Effective January 1, 2005, the pension system for
the former directors of its legal predecessor, or their
new members of the Management Board was changed
surviving dependants. Amounts paid to such recipi-
to a defined contribution scheme. Once a covered event
ents during the year under review totaled 6,097k euros
occurs, the members of the Management Board receive
(2006: 5,137k euros).
a superannuation endowment in the form of a lumpsum payment combined with a continuing basic annuity. The superannuation endowment comprises the
total of annual contributions calculated on the basis
DEFINED BENEFIT
Retirement pension p.a. on onset
of pension as of balance sheet date
Change in pension
provisions for 2007
540,000.00
15,108
Dr. Jochen Krautter
378,000.00
–172,992
in euros
Alois Linder
342,000.00
–76,264
330,000.00
–116,045
DEFINED CONTRIBUTION
in euros
Superannuation endowment (lump sum)
Basic annuity
Total
lump sum
Addition to superannuation
endowment for 2007
Total basic
annuity (p.a.)
Addition to basic
annuity for 2007
Kasper Rorsted
599,760.00
315,090.00
775.27
268.99
Dr. Friedrich Stara
521,100.00
315,090.00
364.15
139.97
Hans Van Bylen
511,244.10
309,690.00
666.07
255.60
Annual Report 2007
27
The Company
2. Remuneration of the Supervisory Board and
of the Shareholders’ Committee
of the financial year preceding the payment-related
year is compared with the EPS of the second financial
year following the payment-related year. If the increase
Regulation
is at least 15 percent, an amount of 600 euros is paid
The remuneration for the Supervisory Board and the
for each full percentage point of the total achieved in-
Shareholders’ Committee has been approved in General
crease. If the increase reaches a minimum of 21 percent,
Meeting; the corresponding provisions are contained
the amount paid per percentage point is 700 euros,
in Articles 17 and 33 of the Articles of Association.
and if the increase is a minimum of 30 percent, the
amount paid per percentage point is 800 euros. The
Structure and Amounts
calculation of the increase is based on the endorsed
The structure and amount of the remunerations are
and approved consolidated financial statements of the
commensurate with the size of the corporation, its
respective financial years as audited and provided with
economic success and the functions performed by the
an unqualified opinion, whereby EPS is also adjusted
Supervisory Board and Shareholders’ Committee respec-
for exceptional items.
tively and the economic success of the corporation.
The remuneration is made up of three components,
The total of the dividend bonus and the long-term
incentive is, however, limited to 50,000 euros (cap).
a fixed fee, a variable, dividend-related bonus and a
variable performance-related long-term incentive (LTI).
Remuneration for Chairpersons/
The details:
Vice-Chairpersons/Subcommittee Members
The Chairperson of the Supervisory Board and the
Fixed Fee
Chairperson of the Shareholders’ Committee each re-
Each member of the Supervisory Board and of the Share-
ceives double the amount, and the Vice-Chairperson
holders’ Committee receives a fixed fee of 20,000 euros
in each case one-and-a-half times the amount accruing
and 50,000 euros per year respectively. The higher fixed
to an ordinary member. Members of the Sharehold-
fee in the latter case is due to the fact that, as required
ers’ Committee who are also members of one or more
by the Articles of Association, the Shareholders’ Com-
subcommittees of the Shareholders’ Committee each
mittee is involved in business management activities.
additionally receive remuneration equivalent to the
initial amount; if they are the chairperson of one or
Dividend Bonus
more subcommittees, they receive double.
Each member of the Supervisory Board and of the
Shareholders’ Committee further receives an annual
Other Regulatory Provisions
bonus of 2,400 euros for every full 0.02 euros by which
The members of the Supervisory Board receive an atten-
the preferred dividend paid out for the prior year ex-
dance fee amounting to 500 euros for each meeting in
ceeds 0.25 euros.
which they participate. In addition, the members of the
Supervisory Board and of the Shareholders’ Committee
Long-term Incentive
are reimbursed expenses arising from the pursuit of
As a long-term incentive, each member of the Supervi-
their mandates. The members of the Supervisory Board
sory Board and of the Shareholders’ Committee receives
are also reimbursed the turnover tax (VAT) payable on
an additional cash payment each year, the amount of
their total remunerations and reimbursed expenses.
which depends on the increase in earnings per pre-
The corporation maintains on behalf of members
ferred share over a three-year reference period. The EPS
of corporate bodies and employees of the Henkel com-
28
Annual Report 2007
pany a third-party group insurance policy protecting
Given this upper maximum, and assuming an increase
against consequential loss, which policy also covers
in EPS of 21 percent in the performance period, the
members of the Supervisory Board and of the Share-
totals applicable for 2007 are 257k euros for the Su-
holders’ Committee. An appropriate own-risk deduct-
pervisory Board and 338k euros for the Shareholders’
ible has been set with respect to the members of both
Committee (including remuneration components for
corporate bodies.
subcommittee activity).
The remuneration of the individual members of the
Remuneration in 2007
Supervisory Board and of the Shareholders’ Commit-
Total remuneration paid to the members of the Super-
tee, broken down according to the above-mentioned
visory Board (fixed fee, dividend bonus, LTI 2007 and
components, are presented in the following tables:
attendance fee) for the year under review amounted to
1,226k euros plus turnover tax (2006: 1,163k euros plus
turnover tax). Of the total cash emoluments paid for
2007 (fixed fees, dividend bonus and attendance fees)
amounting to 969k euros plus turnover tax of 174k euros
(2006: 906k euros plus turnover tax of 131k euros), 350k
euros was for fixed fees, 588k euros was in dividend
bonus and 31k euros was for attendance fees.
The total remuneration of the members of the
Shareholders’ Committee for the year under review
(fixed fee, dividend bonus and LTI 2007, including
the components payable for subcommittee activity)
amounted to 2,260k euros (2006: 2,273k euros). Of the
total cash emoluments paid for 2007 (fixed fee and
dividend bonus, including the components payable
for subcommittee activity) amounting to 1,922k euros
(2006: 1,920k euros), 1,149k euros was for fixed fees and
773k euros was in dividend bonus.
The dividend bonus in each case was based on a
dividend of 0.53 euros per preferred share.
Also included in the total remuneration figures is
the long-term incentive (LTI) for 2007 granted to the
members of the Supervisory Board and of the Shareholders’ Committee in the form of a deferred conditional payment entitlement which will be paid out following the 2010 Annual General Meeting as a function
of the earnings per preferred share (EPS) achieved in
fiscal 2009. It is a legal requirement that an LTI value be
disclosed in the year of grant. According to our Articles
of Association, the total of dividend bonus and LTI is
limited to a ceiling of 50k euros per ordinary member.
Annual Report 2007
29
The Company
REMUNERATION OF THE SUPERVISORY BOARD
Cash components
in euros
Dipl.-Ing. Albrecht Woeste, Chairman
Winfried Zander, Vice-Chairman
Dr. Friderike Bagel
Engelbert Bäßler
Hans Dietrichs
Fixed fee
Dividend
bonus
Attendance
fee
Total cash
emoluments
2007
40,000
67,200
2,000
109,200
29,400
138,600
2006
40,000
60,000
2,000
102,000
29,400
131,400
2007
30,000
50,400
2,000
82,400
22,050
104,450
2006
30,000
45,000
2,000
77,000
22,050
99,050
2007
20,000
33,600
2,000
55,600
14,700
70,300
2006
20,000
30,000
2,000
52,000
14,700
66,700
Value of
long-term
incentive1)
Total
remuneration1)
2007
20,000
33,600
2,000
55,600
14,700
70,300
2006
20,000
30,000
2,000
52,000
14,700
66,700
2007
20,000
33,600
2,000
55,600
14,700
70,300
2006
20,000
30,000
2,000
52,000
14,700
66,700
Benedikt-Joachim Freiherr von Herman
(until April 10, 2006)
2007
–
–
–
–
–
–
2006
5,425
8,137
500
14,062
3,987
18,049
Bernd Hinz
2007
20,000
33,600
2,000
55,600
14,700
70,300
2006
20,000
30,000
2,000
52,000
14,700
66,700
Thomas Manchot
(since April 10, 2006)
Prof. Dr. Dr. h.c. mult. Heribert Meffert
Andrea Pichottka
Prof. Dr. Dr. h.c. mult. Heinz Riesenhuber
Heinrich Thorbecke
(until April 10, 2006)
Konstantin von Unger
(since April 10, 2006)
2007
20,000
33,600
2,000
55,600
14,700
70,300
2006
14,575
21,863
1,500
37,938
10,713
48,651
2007
20,000
33,600
1,500
55,100
14,700
69,800
2006
20,000
30,000
2,000
52,000
14,700
66,700
2007
20,000
33,600
2,000
55,600
14,700
70,300
2006
20,000
30,000
2,000
52,000
14,700
66,700
2007
20,000
33,600
1,500
55,100
14,700
69,800
2006
20,000
30,000
2,000
52,000
14,700
66,700
2007
–
–
–
–
–
–
2006
5,425
8,137
500
14,062
3,987
18,049
2007
20,000
33,600
2,000
55,600
14,700
70,300
2006
14,575
21,863
1,500
37,938
10,713
48,651
Michael Vassiliadis
2007
20,000
33,600
2,000
55,600
14,700
70,300
2006
20,000
30,000
1,500
51,500
14,700
66,200
Bernhard Walter
2007
20,000
33,600
2,000
55,600
14,700
70,300
2006
20,000
30,000
1,500
51,500
14,700
66,200
2007
20,000
33,600
2,000
55,600
14,700
70,300
2006
20,000
30,000
2,000
52,000
14,700
66,700
Werner Wenning
Dr. Anneliese Wilsch-Irrgang
Rolf Zimmermann
Total
1)
2007
20,000
33,600
2,000
55,600
14,700
70,300
2006
20,000
30,000
2,000
52,000
14,700
66,700
70,300
2007
20,000
33,600
2,000
55,600
14,700
2006
20,000
30,000
2,000
52,000
14,700
66,700
2007
350,000
588,000
31,000
969,000
257,250
1,226,250
2006
350,000
525,000
31,000
906,000
257,250
1,163,250
LTI payout in 2010; these figures will only be attained in the event of EPS/share price increasing by 21 percent in the performance period; amounts disclosed exclude
turnover tax
30
Annual Report 2007
REMUNERATION OF THE SHAREHOLDERS’ COMMITTEE
Cash components
Fixed fee
(Chairman Human Resources Subcommittee)
Stefan Hamelmann, Vice-Chairman
(Vice-Chairman Finance Subcommittee)
Dr. h.c. Christoph Henkel, Vice-Chairman
(Chairman Finance Subcommittee)
Dr. Paul Achleitner
(Member Finance Subcommittee)
Dr. Simone Bagel-Trah
(Member Human Resources Subcommittee)
Dr. h.c. Ulrich Hartmann
Burkhard Schmidt
Konstantin von Unger (Vice-Chairman
Human Resources Subcommittee)
Karel Vuursteen
Dr. Hans-Dietrich Winkhaus
Total
Dividend
bonus
Total
Fee for subcash
committee
activity3) emoluments
Value of
long-term
incentive1)
Total
remuneration2)
2007
100,000
67,200
167,200
334,400
58,800
393,200
2006
100,000
60,000
160,000
320,000
58,800
378,800
2007
75,000
50,400
83,600
209,000
36,750
245,750
2006
75,000
45,000
80,000
200,000
36,750
236,750
2007
75,000
50,400
167,200
292,600
51,450
344,050
2006
75,000
45,000
160,000
280,000
51,450
331,450
2007
50,000
33,600
83,600
167,200
29,400
196,600
2006
50,000
30,000
80,000
160,000
29,400
189,400
2007
50,000
33,600
83,600
167,200
29,400
196,600
2006
50,000
30,000
80,000
160,000
29,400
189,400
2007
50,000
33,600
83,600
167,200
29,400
196,600
2006
50,000
30,000
80,000
160,000
29,400
189,400
2007
24,658
16,570
41,228
82,456
14,499
96,955
2006
50,000
30,000
80,000
160,000
29,400
189,400
2007
50,000
33,600
83,600
167,200
29,400
196,600
2006
50,000
30,000
80,000
160,000
29,400
189,400
2007
50,000
33,600
83,600
167,200
29,400
196,600
2006
50,000
30,000
80,000
160,000
29,400
189,400
2007
50,000
33,600
83,600
167,200
29,400
196,600
2006
50,000
30,000
80,000
160,000
29,400
189,400
2007
574,658
386,170
960,828
1,921,656
337,899
2,259,553
2006
600,000
360,000
960,000
1,920,000
352,800
2,272,800
1)
including the LTI amount arising from subcommittee activity
LTI payout in 2010; these figures will only be attained in the event of EPS/share price increasing by 21 percent in the performance period
3)
proportional fixed fee and dividend bonus
2)
Annual Report 2007
31
The Company
in euros
Group Management Report Subindex
Subindex
33 Group Management Report
44 Employees
33 Operational Activities
46 Procurement
33 Overview
46 Production
33 Organization and Business Sectors
47 Research and Development
33 Corporate Governance, Remuneration
49 Marketing and Distribution
34 Strategy and 2008 Financial Targets
50 Sustainability/Corporate Social Responsibility
35 Value-based Management and Control
52 Business Sector Performance
®
35 EVA and ROCE in Fiscal 2007
52 Laundry & Home Care
36 Statutory and Regulatory Situation
56 Cosmetics/Toiletries
37 Business Performance
37 World Economy
37 Private Consumption
and Developments by Sector
37 Sales and Profits
39 Expense Items
65 Opportunity and Risk Management System
65 Disclosure of Major Individual Risks
68 Overall Risk
69 Outlook for the Henkel Group
40 Other Operating Charges and Income
69 Underlying Conditions
40 Financial Result
69 World Economy
40 Net Earnings
69 Sector Development
40 Dividends and Distribution Policy
69 Opportunities and Risks
40 Earnings Per Share (EPS)
69 Sales and Profits Forecast for 2008
41 Assets and Financial Analysis
41 Acquisitions and Divestments
41 Capital Expenditures
42 Balance Sheet Structure
42 Financing
43 Cash Flow Statement
44 Key Financial Ratios
32
60 Adhesives Technologies
65 Risk Report
Annual Report 2007
70 Long-term Sales and Profits Forecast
70 Subsequent Events
Group Management Report
Group Management Report for Fiscal 2007
Operational Activities
Effective April 1, 2007, the two previously separately
managed business sectors Consumer and Craftsmen
Overview
Adhesives and Henkel Technologies were merged to
Founded in 1876, Henkel is able to look back over more
form the new business sector Adhesives Technologies,
than 130 years of successful entrepreneurial endeavor. To-
enabling the adoption of a unified market approach
day, Henkel boasts a global workforce of more than 53,000
with better utilization of the core competences of both
employees and day in, day out, people in more than 125
businesses. This serves to promote the goal of achieving
countries put their trust in our brands and technologies.
accelerated growth in all regions around the world.
The product range of the Laundry & Home Care
GLOBAL OPERATIONS
business sector comprises heavy-duty detergents, special
Cosmetics/Toiletries business sector encompasses hair
cosmetics, products for body, skin and oral care, and
products and services for the hair salon business. The
Adhesives Technologies business sector offers adhesives, sealants and surface treatment products for use in
household and office applications, for do-it-yourselfers
and professional craftsmen, and for industrial and engineering applications.
Countries in which Henkel operates
Our three business sectors are managed on the basis
of globally operational strategic business units. They
Organization and Business Sectors
are supported by the central functions of Henkel KGaA
Henkel KGaA is operationally active as well as being
in order to ensure optimum utilization of corporate
the parent company of the Henkel Group. In this latter
synergies. Implementation of the strategies at a local
capacity, it is responsible for defining and pursuing
level is the responsibility of the affiliated companies.
Henkel’s corporate objectives and for the management,
The executive bodies of these companies manage their
control and stewardship of corporate-wide activities,
businesses in line with the relevant statutory regula-
including risk management and the distribution of
tions, supplemented by their own articles of associa-
resources. Henkel KGaA performs its tasks within the
tion, internal procedural rules and a globally binding
legal scope afforded to it as part of the Henkel Group,
code of conduct.
with the affiliated companies otherwise operating as
legally independent entities. Operational control of the
Corporate Governance, Remuneration
corporation is incumbent upon the Management Board,
Further details of corporate governance at Henkel KGaA
which in turn is supported by the Corporate Center.
and the remuneration of the members of the Man-
Henkel is organized into three business sectors:
agement Board, Supervisory Board and Shareholders’
» Laundry & Home Care
Committee are provided in the Corporate Governance
» Cosmetics/Toiletries
Report on page 21ff. and the Remuneration Report on
» Adhesives Technologies
page 24ff.
Annual Report 2007
33
detergents and cleaning products. The portfolio of the
Strategy and 2008 Financial Targets
also developing increasing numbers of products in
In order to achieve our strategic objective of profitable
collaboration with them. As well as participating in
growth, we have fixed our focus on three fast-growing
venture capital companies, we have cooperation and
areas of competence:
partnership arrangements with universities and indus-
» Laundry & Home Care
trial associations. Further, we have made it a priority
» Cosmetics/Toiletries
to constantly improve our innovation processes, with
» Adhesives Technologies
the application of increasingly efficient procedures
enabling us to reduce the period from product idea to
We already boast leading market positions in each of
market launch. Through this approach, we ensure that
these three core competences, and we intend to further
less promising concepts are filtered out at an early stage
expand these not only through organic sales growth
so that we can concentrate even more effectively on the
but also through selected acquisitions – as in the case of
further development of the best product ideas and on
the intended purchase of the Adhesives and Electronic
optimizing the deployment of our financial resources.
Materials businesses from National Starch.
Our aim is to increase the share of sales attributable to
A further important element of our long-term
strategy is that of concentrated regional expansion.
Without neglecting Western Europe, we intend to grow
our presence in the North American market while
new products launched over the previous three to five
years from 25 percent to 30 percent.
You can find further information on the strategies
of our business sectors starting on page 52.
also fixing a strong focus on the growth markets of
Our financial targets for 2008 envision not only
Eastern Europe, Africa/Middle East, Asia (excl. Japan)
organic growth in sales but also disproportionate in-
and Latin America. Thanks to the continuing highly
creases in both operating profit and earnings per share
dynamic development of these growth markets in the
(EPS). We likewise intend to further improve our return
year under review, their share of sales now amounts to
on capital employed (ROCE). To achieve these objectives,
34 percent. This means that we have already far ex-
we will be concentrating even more on products offer-
ceeded our 2008 target of increasing the proportion of
ing high contributions while also targeting further
sales accounted for by these markets to at least 30 per-
improvements in operating margins, particularly in
cent. And we will remain focused on the dynamics of
our growth markets. We also aim to become more ef-
these markets going forward.
ficient along our entire value chain.
Our strong brands and successful technologies are
expected to play a decisive role in the attainment of
Again in 2007, we came a step closer to achieving
our 2008 financial targets:
further growth. We are represented by our brands in
both the premium and value-for-money segments. Our
DEVELOPMENT IN KEY FINANCIALS
portfolio comprises a balanced mix of international,
in percent
regional and local brands. We support these through
Organic sales growth p.a.
the development of high-quality, innovative products
as well as through advertising and other promotional
ROCE
14.5
15.4
16
activities. These investments serve to enhance the value
EPS (preferred) growth p.a.
12.6
7.5
≥ 10
2007
Target
6.0
5.8
3–4
10.2
10.3
12
2006
of our brands and ensure that they remain attractive
in the marketplace.
We are aligning our product development activities even more closely to the requirements and
needs of customers and consumers and are therefore
34
Annual Report 2007
The outlook for the Henkel Group for fiscal 2008 can
be found on page 69.
Value-based Management and Control
WEIGHTED AVERAGE COST OF CAPITAL (WACC)
To make achievement of our growth targets measurable,
until 2007 from 2008
we have adopted a modern system of metrics allowing
Risk-free interest rate
4.0 %
4.8 %
us to calculate value-increase and return ratios in line
Market risk premium
4.5 %
4.5 %
with capital market practice.
Beta factor
0.90
0.90
Cost of equity after tax
8.1 %
8.9 %
Cost of debt capital before tax
5.1 %
5.6 %
–1.5 %
–1.7 %
3.6 %
3.9 %
75 %
75 %
25 %
25 %
7.0 %
7.5 %
30 %
30 %
10.0 %
11.0 %
We use economic value added (EVA®)1) as a central
to date and to appraise future plans. EVA® is a measure
of the additional financial value created by a company
in a given reporting period. A company creates economic value added if its operating profit exceeds its
cost of capital, the latter being defined as the return
on capital employed (ROCE) expected by the capital
market.
Operational business performance is measured on
the basis of operating profit (EBIT). The capital employed figure is calculated from the assets side of the
Tax shield (30 %)
Cost of debt capital after tax
Share of equity1)
1)
Share of debt capital
WACC after tax2)
Tax rate
2)
WACC before tax
1)
at market values
2)
rounded
balance sheet. A reconciliation of the year-end figures
in the balance sheet to the average values used in deter-
exhibiting consistently negative value contributions
mining capital employed can be found on page 115.
with no prospect of positive EVA® values in the future
The cost of capital employed is calculated as a
are divested or otherwise discontinued.
weighted average of the cost of capital (WACC) compris-
In order to be better able to compare business units
ing both equity and debt. In fiscal 2007, we applied a
of varying size, we additionally apply return on capital
WACC after tax of 7 percent. Before tax, the figure was
employed, calculated as follows:
10 percent. We regularly review our cost of capital in
ROCE = EBIT / Capital Employed
order to reflect changing market conditions. Hence, due
ROCE represents the average return on capital em-
to the increase in interest rate levels, we are adopting
ployed. We create value where this metric exceeds the
a WACC value of 11 percent before tax and 7.5 percent
cost of capital.
after tax as from fiscal 2008.
Also effective 2008, we will be applying different
EVA® and ROCE in Fiscal 2007
WACC values depending on the business sector in-
In 2007, the Henkel Group generated EVA® amount-
volved, based on sector-specific beta factors. This will
ing to 469 million euros, 67 million euros more than
result in a WACC before tax of 10.5 percent (7.5 percent
in the previous year. All our business sectors posted a
after tax) for both Laundry & Home Care and Cosmetics/
positive EVA® figure, exceeding the prior-year result in
Toiletries, and of 12.0 percent before tax (8.5 percent
each case. We were also able to improve on our ROCE
after tax) for Adhesives Technologies.
with an increase from 14.5 percent to 15.4 percent. This
At Henkel, EVA® is calculated as follows:
value creation is attributable both to positive develop-
EVA® = EBIT – (Capital Employed x WACC)
ments in operating profit and to a reduction in capital
EVA® serves to promote value-adding decisions and
employed achieved through working capital optimiza-
profitable growth in all our business sectors. Operations
tion. Both metrics demonstrate that Henkel is well on
1)
track for further profitable growth.
EVA® is a registered trademark of Stern Stewart & Co.
Annual Report 2007
35
performance management parameter to assess growth
EVA® AND ROCE1)
Laundry &
Home Care
Cosmetics/
Toiletries
Adhesives
Technologies
Corporate
Group
459
372
621
–108
1,344
2,752
2,236
3,680
76
8,744
276
223
368
8
875
EVA 2007
183
149
253
–116
469
EVA® 2006
153
126
214
–91
402
in million euros
EBIT
Capital employed
WACC (10 %)
®
ROCE 2007
in %
16.7
16.7
16.9
–
15.4
ROCE 2006
in %
15.2
15.4
15.9
–
14.5
1)
calculated on the basis of units of 1,000 euros
Statutory and Regulatory Situation
» Food and feedstuffs code
Our business is governed by national rules and regula-
» Cosmetics regulations
tions and – within the European Union (EU) – increas-
» Detergents regulations
ingly by harmonized pan-European laws. One such
» Biocides law
currently involves the realignment of chemical policy
» Machinery, equipment and product safety law
in the EU resulting in changes in the registration,
evaluation, authorization and restriction of chemical
In the member states of the European Union, compli-
substances (REACH). In certain segments, the granting
ance is also required with the following directives, most
of approvals, permits and licenses is subject to our
of which have been transformed into national law:
ability to meet specific technical requirements. Our
aerosols and biocides directives; material, preparation
production sites must also be operated in line with
and safety data sheet directives; cosmetics and product
environmental regulations.
safety directives.
The REACH process primarily affects Henkel as a
National supervisory and surveillance bodies moni-
user of chemical materials; however, it also affects us
tor compliance with the associated rules and regula-
as an importer and manufacturer. In order to mini-
tions. As soon as noncompliance is ascertained, these
mize the additional costs incurred through REACH
authorities institute appropriate measures, which may
and with the advent of the pre-registration phase in
range from the issue of administrative orders to the
2008, we have already aligned our existing processes
prohibition of the commercial sale of a product.
to meet future requirements. This means that we will
We are also required to comply with various manu-
be able to integrate the evaluation of product ingre-
facturing regulations in relation to the following:
dients as required under REACH within our existing
» The use, storage, handling and transportation of cer-
assessment processes. Certain materials used by the
Adhesives Technologies business sector may also be
subject to the approval process.
The product-specific regulations relate primarily to
tain substances
» Emissions, wastewater, residues and other waste
materials
» The construction and operation of industrial facilities
ingredients and input materials, safety of manufacture,
handling, and the packaging and marketing of the fin-
Our internal standards ensure compliance with statu-
ished article. The control mechanisms involved range
tory regulations and ensure the safety of our produc-
from material-related regulations, usage prohibitions
tion facilities for workers, local communities and the
or restrictions, and procedural requirements (test and
environment. The associated requirements have been
inspection, identification marking, provision of warn-
incorporated in our internal safety, health and environ-
ing labels, etc.), to product liability law.
ment management systems, which in turn are subjected
In Germany, the following statutes are particularly
to a regular audit and review regime. We also endeavor
important for our operations:
to ensure that relevant legal requirements and statu-
» Chemicals law and hazardous substances/dangerous
tory changes are both quickly identified and properly
goods regulations
36
Annual Report 2007
assimilated.
Business Performance
The packaging industry likewise posted tangible increases, as did the metals sector.
World Economy
The regional pattern of development in the construc-
Overall, the world economy in 2007 showed itself to
tion industry was very mixed. There was a further decline
be in robust shape, although raw material prices un-
in building activity in the USA – especially in the home
derwent further increases and the US real estate crisis
construction segment – while the development boom in
coupled with the falling US dollar unsettled the mar-
Eastern Europe continued unabated. In Western Europe,
ket. In general, this resulted in only a slight easing of
construction underwent encouraging growth.
economic growth.
The majority of the national economies of Western
Europe, including that of Germany, continued their
Further details on developments with respect to
specific segments and regions can be found in the individual business sector reports starting on page 52.
moderate upward climb. Most of the countries of EastThe US economy cooled further in the course of
the year.
Sales and Profits
Henkel Group sales in 2007 amounted to 13,074 million
euros, a rise of 2.6 percent compared to the figure for
The good level of economic growth exhibited by
the previous year. After adjusting for foreign exchange,
Asia, particularly China and India, continued. However,
sales increased by 5.3 percent. Organic sales growth,
Japan’s economy once again underwent only moder-
i.e. growth adjusted for foreign exchange, acquisitions
ate growth.
and divestments, increased to an encouraging 5.8 per-
There was a further acceleration in the growth rates
cent, with 4.3 of these percentage points attributable
exhibited by Latin America.
to volume growth and 1.5 to price increases.
Private Consumption and Developments
SALES DEVELOPMENT1)
by Sector
in percent
Private consumer spending experienced moderate ex-
Change versus previous year
pansion worldwide. Despite dampened confidence, con-
Foreign exchange
sumers in the USA remained relatively keen to spend.
After adjusting for foreign exchange
There was a moderate increase in private consumption
Acquisitions/Divestments
in Western Europe. In Germany, the increase in value-
Organic
1)
added tax resulted in a slight decline in private con-
2007
2.6
–2.7
5.3
–0.5
5.8
sumer spending. The propensity to consume in Eastern
Europe was more pronounced. High growth rates in
PRICE AND VOLUME EFFECTS1)
the consumer segment were also registered by most
in percent
Organic
sales
growth
of which
price
of which
volume
Laundry & Home Care
5.5
0.1
5.4
5.8
0.2
5.6
countries of Latin America, while private consumption
in Asia lagged behind overall economic growth.
Again in 2007, industrial development worldwide
was stronger than that of private consumption, al-
6.5
3.2
3.3
though it tailed off slightly toward the end of the year.
Henkel Group
5.8
1.5
4.3
Growth in the automotive industry roughly matched
1)
that of the global economy, with further decline in the
USA and sluggish improvement in Western Europe com-
All our business sectors were able to post an increase
paring with strong growth rates in Eastern Europe, Asia
in organic sales. At Laundry & Home Care, sales were
and Latin America. The electronics industry underwent
affected by the divestment of marginal businesses in
positive development, particularly the information and
the form of the foods operation in North America, sold
communication technology segment.
in the first quarter of 2006, and our oils and fats opera-
Annual Report 2007
37
ern Europe maintained their dynamic growth rates.
SALES BY BUSINESS SECTOR1)
in million euros
SALES
in million euros
11,974
13,000
9,436
9,750
12,740 13,074
5,510 5,711
5,600
10,592
4,200
6,500
2,800
3,250
1,400
0
4,117 4,148
2,864 2,972
0
2003
2004
2005
2006
2007
1)
2006 2007
2006 2007
2006 2007
Laundry &
Home Care
Cosmetics/
Toiletries
Adhesives
Technologies
excluding Corporate
1)
SALES BY REGION
in million euros
8,000
8,045
the share of sales accounted for by the Europe/Africa/
8,480
Middle East region rose from 63 to 65 percent.
Due to negative currency impact, sales in the North
6,000
America region fell by 6.8 percent to 2,557 million
4,000
euros. After adjusting for foreign exchange, sales
2,742 2,557
2,000
663 691
1,041 1,103
0.7 percent. The main contribution here came from
0
1)
rose by 1.4 percent and organic growth amounted to
2006 2007
2006 2007
2006 2007
2006 2007
Europe/Africa/
Middle East
North America
Latin America
Asia-Pacific
excluding Corporate
the Cosmetics/Toiletries business sector, while sales
at Adhesives Technologies fell below the prior-year
level due to the weakness of the construction-related
tion in Turkey and our private label business in West-
trades and of the US automotive industry. The share
ern Europe, both sold in the second quarter of 2007.
of total Group sales of this region decreased from
In the case of the Cosmetics/Toiletries business sec-
22 to 20 percent.
tor, the acquisition in 2006 of the Right Guard brands
The Latin America region recorded an increase
portfolio, and of the hair cosmetics and personal care
in sales of 4.3 percent to 691 million euros. Adjusted
business of Jasminal, Tunisia, boosted sales, while rev-
for foreign exchange, the region’s revenues rose by
enues derived from our divested fine fragrance business
9.4 percent with the organic growth rate coming in at
have been absent since the second quarter of 2007. At
7.7 percent. All our business sectors contributed to these
Adhesives Technologies, the additional sales arising
improvements. The share of total Group sales accounted
from the acquisition of Alba Adesivos, Cimsec, Accu-
for by Latin America remained at 5 percent.
rus, Xianghua and Jiangsu more than offset the loss of
Business results in the Asia-Pacific region were
revenues arising in 2006 from our divested businesses
similarly positive with sales rising by 6.0 percent to
with rubber-to-metal bonding chemicals and insulat-
1,103 million euros and by 9.7 percent after adjusting
ing glass sealants.
for foreign exchange. Organic growth amounted to
In the regional breakdown, Europe/Africa/Middle
7.7 percent. The Adhesives Technologies business sec-
East showed a significant increase in growth to which
tor in particular was able to benefit from the strong
all our business sectors contributed, with sales rising
growth dynamics of the region, which again accounted
5.4 percent to 8,480 million euros. The rise after ad-
for 8 percent of total Group sales.
justing for foreign exchange amounted to 6.0 percent.
Our growth regions of Eastern Europe, Africa,
Within this region, the growth posted by Eastern Eu-
Middle East, Latin America and Asia (excluding Japan)
rope and Africa/Middle East was well above average,
posted an overall growth rate of 12.7 percent, with sales
and we were also able to increase our sales in Germany.
rising to 4,388 million euros. All our business sectors
Organic sales growth amounted to 7.4 percent. Overall,
contributed to this improvement. After adjusting for
foreign exchange, growth amounted to 15.3 percent
and organic sales rose by 15.1 percent.
38
Annual Report 2007
EBIT BY BUSINESS SECTOR1)
in million euros
EBIT
in million euros
1,500
1,162
1,250
1,298
1,344
449 459
835
750
579
500
996
1,000
621
625
359 372
375
250
500
125
250
0
0
2003
2004
2005
2007
2006
1)
2006 2007
2006 2007
2006 2007
Laundry &
Home Care
Cosmetics/
Toiletries
Adhesives
Technologies
excluding Corporate
EBIT BY REGION1)
in million euros
1,050
957
5.0 percent (5.4 percent after adjusting for foreign ex-
1,005
change), with all our business sectors contributing. At
875
the level of the previous year.
525
350
In North America, operating profit declined by
321 308
3.8 percent. However, after adjusting for foreign ex-
175
43 58
0
1)
66
81
2006 2007
2006 2007
2006 2007
2006 2007
Europe/Africa/
Middle East
North America
Latin America
Asia-Pacific
change, it rose by 5.4 percent. Return on sales improved
by 0.4 percentage points to 12.1 percent.
From a still low base, the EBIT figure of the Latin
excluding Corporate
America region increased by 35.5 percent (40.8 percent
after adjusting for foreign exchange), the Adhesives
HENKEL GROUP EBIT
in million euros
2006
2007
Technologies business sector making a major contri-
EBIT from business sectors/regions
1,387
1,452
bution. Return on sales improved by 2.0 percentage
–89
–108
1,298
1,344
EBIT Corporate
EBIT
points to 8.4 percent.
The Asia-Pacific region likewise posted a further increase in profitability, its EBIT growing by 22.2 percent
Operating profit (EBIT) increased to 1,344 million eu-
(27.8 percent after adjusting for foreign exchange). In
ros, a rise of 3.5 percent above the prior-year figure of
this region, too, Adhesives Technologies was able to post
1,298 million euros, to which all our business sectors
a significant rise in operating profit. At 7.3 percent,
contributed. After adjusting for foreign exchange, the
return on sales in Asia-Pacific improved by 0.9 percent-
increase amounted to 5.8 percent. Return on sales in-
age points versus the prior-year figure.
creased to 10.3 percent.
The situation on the markets for raw materials
and packaging remained strained throughout 2007.
Further details relating to our business performance
can also be found in the reports dealing with the individual business sectors starting on page 52.
Nevertheless, we were able through internal countermeasures to keep cost increases within the low single-
Expense items
digit percentage range, whereby the rise at Adhesives
The cost of sales for the year under review rose by
Technologies was slightly higher than in the case of
0.7 percent to 7,013 million euros. Despite the price in-
the other two business sectors. We were able to pass on
creases for raw materials and packaging, we succeeded
a portion of the material cost increases through price
in keeping the rate of rise below that of sales. Gross
rises of our own.
profit improved by 4.9 percent to 6,061 million euros,
Our regions also performed very successfully with currency-adjusted operating profit increasing everywhere.
and gross margin increased by 1.1 percentage points
to 46.4 percent in the year under review.
In Europe/Africa/Middle East, the EBIT figure rose by
Annual Report 2007
39
11.9 percent, this region’s return on sales remained at
700
At 3,748 million euros, marketing, selling and distribution expenses were 2.7 percent above the prior-year
NET EARNINGS1)
in million euros
1,000
figure.
Expenditure on research and development amount-
800
ed to 350 million euros, increasing by 2.9 percent com-
600
pared to the figure for the previous year. The R&D ratio,
400
i.e. research and development expenses expressed as
748
770
2004
2005
871
941
629
200
a proportion of sales, remained at the prior-year level
of 2.7 percent. Administrative expenses decreased by
4.7 percent to 664 million euros. This is due to lower
0
2003
1)
2006
2007
comparable values before goodwill amortization
project expenditures and higher cost savings in 2007
compared to the previous year, which was additionally
Net earnings for the year increased by 70 million euros
burdened by higher restructuring charges.
to 941 million euros. After deducting minority interests of 20 million euros, earnings totaled 921 million
Other Operating Charges and Income
The balance of other operating charges and income
decreased by 163 million euros to 45 million euros.
euros.
The annual financial statements of Henkel KGaA
are summarized on page 122.
The previous year’s figures were boosted by exceptional
gains arising from the sale of the foods business (16 mil-
Dividends and Distribution Policy
lion euros) and disposal of the rubber-to-metal bond-
The level of dividend distribution is primarily aligned
ing chemicals and insulating glass sealant businesses
to earnings after deducting minority interests and ex-
(41 million euros), plus assignment of claims relat-
ceptional items. The payout ratio should be around
ing to a hereditary building lease to Henkel Trust e.V.
25 percent. In view of our positive earnings perfor-
(43 million euros). Included in the operating profit for
mance, the proposal to be put before the Annual Gen-
2007 are gains from the sale of real estate in Turkey
eral Meeting will be for a 3 eurocent increase in divi-
amounting to 8 million euros.
dends payable on both classes of share. This will yield
payouts of 0.53 euros per preferred share and 0.51 euros
Financial Result
per ordinary share.
Net financial result improved by 28 million euros to
–94 million euros. This was primarily due to an increase
Earnings Per Share (EPS)
of 5 million euros in income from our participation in
Basic earnings per share are calculated by dividing earn-
Ecolab Inc., St. Paul, Minnesota, USA (accounted for by
ings after minority interests by the weighted average
the at-equity method) and the fact that, in the previ-
number of shares outstanding during the reporting
ous year, an impairment loss amounting to 26 million
period. Earnings per preferred share rose from 1.99
euros was recognized on our participation in Lion Cor-
euros in 2006 to 2.14 euros in 2007. Earnings per ordi-
poration, Tokyo, Japan, which was sold in November
nary share increased from 1.97 euros to 2.12 euros in
2006.
the same period.
Net interest expense increased by 2 million euros
The Stock Incentive Plan introduced in 2000 re-
to –178 million euros. The price effect arising from
sulted in a slight dilution of earnings per preferred
the rise in interest rate levels was essentially offset by
share at December 31, 2007, as the options from all five
further reductions in borrowings.
tranches issued were “in the money”. This effect derives
from 420,247 preferred shares that could potentially
Net Earnings
flow back into the market. The resultant dilution in
Earnings before tax increased by 6.3 percent to 1,250
EPS amounts to 1 eurocent compared to basic earnings
million euros. Taxes on income amounted to 309 mil-
per share.
lion euros. At 24.7 percent, the tax rate was 1.2 percentage points below the level of the previous year.
40
Annual Report 2007
PREFERRED SHARE DIVIDENDS1)
in euros
EARNINGS PER PREFERRED SHARE1) 2)
in euros
0.50
0.5
0.40
0.4
0.43
0.532)
3
0.45
2
2004
2005
1.99
2.14
1
0.2
0.1
0
2003
0
2003
2004
2005
2006
2006
2007
2007
1)
2)
1.77
1.45
0.3
1)
1.75
proposal
Assets and Financial Analysis
2)
comparable values before goodwill amortization
improvements such as the merging of certain adminprojects implemented in 2007 were as follows:
Our acquisition and divestment activities focused on
» Capacity increases for liquid detergent production in
the disposal of non-strategic businesses. The proceeds
Ferentino, Italy, and Perm, Russia (Laundry & Home
from the sale of such operations amounted to 93 mil-
Care)
lion euros.
The Laundry & Home Care business sector sold its
business with oils and fats in Turkey together with the
» Expansion and relocation to Aurora, USA of the
stick deodorant production operation acquired from
Gillette (Cosmetics/Toiletries)
associated production site in Izmir. Also divested were
» Commissioning of five new factories for building
our private label businesses operated by the legal enti-
adhesives and allied chemical construction products
ties Chemolux S.à.r.l., Foetz, Luxembourg and Chemtek
in Eastern Europe (Bulgaria, Romania, Russia, Serbia,
Ltd., Coventry, UK, together with their respective production sites in Luxembourg and Coventry.
Cosmetics/Toiletries divested the fine fragrance
business operated by Morris Profumi S.p.A., Milan, Italy.
The production site near Parma was likewise acquired
by the purchaser.
Ukraine) (Adhesives Technologies)
» Completion of the new head office complex and
development center in Shanghai, China (Adhesives
Technologies)
» Expansion in soldering powder production capacity
in Yantai, China (Adhesives Technologies)
Two relatively small marginal activities were divested by the Adhesives Technologies business sector: the
In regional terms, the emphasis of our capital expendi-
wire drawing dry soap operation serving the metalwork-
tures in 2007 lay in Europe and North America.
ing industry, and the coating business manufacturing
products for screw fastener securement.
In 2008, spending on property, plant and equipment is to focus on Europe. Major investments in our
Laundry & Home Care business sector will include pro-
Capital Expenditures
duction facilities for the manufacture of innovative
Capital expenditures (excluding financial assets) totaled
products, and process optimization activities. For the
540 million euros in the year under review.
Adhesives Technologies business sector, the expendi-
Investments in property, plant and equipment for
ture emphasis in 2008 will be on the integration of the
our continuing operations amounted to 470 million
production capacities of National Starch. Also planned
euros, and were thus 39 million euros above the prior-
are investments in manufacturing facilities for building
year figure. A major share of these expenditures went
adhesives and allied chemical construction products
into the establishment and expansion of production
in Russia and Ukraine.
capacities. A further portion was spent on structural
Annual Report 2007
41
istrative and production sites. The major individual
Acquisitions and Divestments
Shareholders’ equity rose from 5,547 million euros
CAPITAL EXPENDITURES 2007
in million euros
Total
Continuing
operations
Acquisitions
470
10
480
40
20
60
510
30
540
Property, plant
and equipment
Intangible assets
Total
to 5,706 million euros (2.9 percent), with the boost of
941 million euros in net earnings being partially offset
by negative currency translation effects amounting to
425 million euros, items set off against equity totaling
134 million euros, and dividends paid out by Henkel
KGaA and certain affiliated companies amounting to
223 million euros. The equity ratio rose by 2.1 percent-
Balance Sheet Structure
age points to 43.7 percent.
Compared to the previous year, the balance sheet totals
Non-current liabilities fell by 7.7 percent to 3,651 mil-
fell by 298 million euros to 13,048 million euros. On
lion euros. The decrease in provisions for pensions is
the assets side, the decrease under the non-current
due to the higher discount factor versus prior year,
heading was 733 million euros to 7,931 million euros.
and a surplus of payments arising out of pension com-
This was largely due to the weakness of the US dollar
mitments. Current liabilities fell by 151 million euros
versus the euro primarily reducing the book value of
to 3,691 million euros due to a decrease in short-term
our intangible assets. The figure for property, plant
borrowings. Net debt, i.e. total borrowings less liquid
and equipment remained at the level of the previous
funds, decreased compared to the previous year by
year, with additions (capital expenditures) of 470 mil-
703 million euros to 1,702 million euros.
lion euros set off against disposals of 78 million euros
and depreciation of 283 million euros. The currency
The consolidated balance sheet of the Henkel Group
can be found on page 73.
translation effect amounted to –73 million euros.
Financial assets decreased by 34 million euros com-
Financing
pared to the previous year, due mainly to the first-time
The finances of the Group are, to a large extent, cen-
consolidation of Accurus Scientific Co. Ltd., Tainan,
trally managed by Henkel KGaA. Financial funds con-
Taiwan.
stitute a global resource and are, as a rule, centrally
Under current assets, there was a combined de-
procured and then distributed within the Group. The
crease of 216 million euros in inventories and trade
primary goals of financial management are to achieve a
accounts receivable, accompanied by an increase in
sustainable increase in shareholder value and to secure
liquid funds of 511 million euros (55 percent) to 1,440
the creditworthiness and liquidity of the Group. Reduc-
million euros. The assets attributable to the contrac-
ing our capital costs and improving our cash flow from
tually divested water treatment operation and to our
financing activities make a major contribution to the
consumer adhesives business in North America were
attainment of these objectives, as do optimization of
reclassified as assets held for sale.
our capital structure and effective risk management.
BALANCE SHEET STRUCTURE
in million euros
Assets
of which in %
Shareholders’ Equity and Liabilities
13,346
Property, plant and equipment/
Intangible assets
57
Financial assets
Other non-current assets
4
4
4
3
Current assets1)
28
28
Liquid funds/Marketable securities
7
11
2006
1)
including assets held for sale
42
13,048
Annual Report 2007
13,346
of which in %
44
42
Shareholders’ equity
5
6
18
17
5
6
6
8
22
21
13,048
54
2007
2007
2006
Pension provisions
Long-term borrowings
Other non-current liabilities
Short-term borrowings
Other current liabilities
Our creditworthiness is regularly checked by indepen-
the effect of reducing the rating-specific borrowing
dent rating agencies.
ratios of the Group (see table showing financial ratios
Following improvements in our financial profile,
on page 44).
the rating agency Standard & Poor’s raised its long- and
For further information on our financial manage-
short-term ratings on April 19, 2007, from “A–/A–2” to
ment approach and our financial instruments, please
“A/A–1”. On August 13, 2007, Henkel and Akzo Nobel
refer to Notes 41 and 42 to the consolidated financial
concluded a back-to-back agreement covering the ac-
statements, page 104ff.
quisition of the two business segments Adhesives and
Electronic Materials from National Starch. In response
Cash Flow Statement
to this news, Moody’s changed its outlook from “stable”
At 1,321 million euros, cash flow from operating
to “negative”. Its “A2” long-term credit rating was con-
activities was 190 million euros above the prior-year
firmed. In August, Standard & Poor’s confirmed its
figure. Earnings before interest, tax, depreciation and
“A/A–1” rating and stable outlook.
amortization (EBITDA) increased by 33 million euros.
This figure reflects lower gains from divestments and
Long-term
Outlook
Short-term
1)
Standard &
Poor’s
Moody’s
A
A2
stable
negative
A–1
P1
which are recognized under investing activity. Income
tax payments increased by 46 million euros. The in-
at December 31, 2007
crease in net working capital gave rise to an outflow
of funds amounting to 50 million euros.
Cash flow from investing activities/acquisitions
improved by 185 million euros to –361 million euros.
In order to maintain our financial flexibility, our finan-
Higher investments in property, plant and equipment
cial strategy is aligned to the single-A rating category.
(39 million euros) were canceled out by a fall of 393
Cash flows from operating activities and from divest-
million euros in acquisition volumes, the difference
ments are used to reduce our net debt exposure.
more than compensating for reduced proceeds from
Essentially, we pursue a conservative borrowing
policy, again aligned to flexibility, within a balanced
divestments and disposals of other non-current assets
(–176 million euros).
financial portfolio. In keeping with our financial re-
At –395 million euros, cash flow from financing
quirements, this is based on a core platform of syndi-
activities resulted in a significantly reduced outflow
cated credit facilities and a multi-currency commercial
of funds compared to the previous year (–758 million
paper program.
euros). This is primarily due to payments into the Con-
At December 31, 2007, our long-term financial li-
tractual Trust Arrangement (CTA) in 2006 which ac-
abilities amounted to 2.3 billion euros. Included in
counted for an outflow of 188 million euros. Moreover,
this figure are the hybrid bond with a fair value of
borrowings were reduced through the repayment of
1.2 billion euros, issued in November 2005, and also
194 million euros.
the fixed-interest bond of 1.0 billion euros issued in
At 769 million euros, free cash flow, which is
May 2003. Our short-term liabilities, i.e. those with
calculated before expenditures on financial assets/ac-
maturities of less than 12 months, amounted to 838
quisitions and before dividends paid, was 17 million
million euros at year-end. These essentially comprise
euros below the prior-year figure, the latter having
interest-bearing loans from third parties and loans
been boosted by the divestment proceeds mentioned
from banks to affiliated companies.
above.
The hybrid bond is treated by Moody’s as 75 percent
equity and by Standard & Poor’s as 50 percent equity.
The detailed consolidated cash flow statement can
be found on page 74.
Compared to classic debt capital, the hybrid bond has
Annual Report 2007
43
disposals of non-current assets, the total proceeds of
CREDIT RATINGS1)
Key Financial Ratios
the aim of encouraging them to pursue a career with
Our key financial ratios underwent further improve-
Henkel.
ment in 2007. The debt coverage and gearing ratios
Whether seeking full-time or part-time positions, in-
reflect a decrease in borrowings and reduced pension
ternships, traineeships or apprenticeships, all potential
obligations, underlining our good overall financial
candidates from more than 50 different countries can
position. The interest coverage ratio remained constant,
contact Henkel directly in their own national language
while the rise in the equity ratio confirms the stability
through our internet portal. In Austria, this new portal
of our net assets position.
– “i@pply” – was crowned best electronic recruitment
tool of that country’s 150 largest companies.
Employees
The possibility of applying for positions online has
also proven very popular with school-leavers wishing
The number of people employed by the corporation at
to acquire training positions at Henkel. Almost 80 per-
the end of the year under review was 53,107.
cent of applications received in Germany were routed
In the course of the year, headcount rose by 815. Per
through this extremely efficient channel. Operating
capita sales increased further to 250,000 euros while
12 training sites, Henkel KGaA offers apprenticeships
Henkel Group payroll costs fell by 3 million euros to
and initial qualifications in more than 20 chemical,
2,348 million euros. The payroll cost ratio – this de-
engineering and commercial fields. From 2003 to 2007,
scribes the relationship between personnel costs and
our intake has increased by more than 15 percent.
sales – fell to 18.0 percent (2006: 18.5 percent).
Management quality is a major factor in ensuring
Following a systematic analysis of Henkel’s image
the sustainability of our corporate success. Conse-
as an employer (“employer branding”), we have devel-
quently, in 2007, we developed a globally standard-
oped an international talent recruiting concept in
ized, module-based continuous training program for
order to counteract increasing competition for quali-
managerial staff from senior grades to our top-most
fied employees and demographic developments. This
“management circle”. The programs are aligned to the
approach specifically addresses relevant target groups
management demands that prevail at different levels
with the objective of providing them with a positive
within the corporation, and are offered either locally,
personal experience of Henkel as an attractive potential
regionally or centrally depending on the target group.
employer.
For the training of the uppermost management level, a
We are also endeavoring to forge early and close
special program geared to the requirements of strategic
links with young talents. We consider high-performing
leadership within the global context was developed
interns to be our management trainees of the future.
in cooperation with the Thunderbird Business School
Through challenging internships and our “Career
(Glendale, Arizona, USA).
Track” student loyalty program, we remain in close
Culturally and nationally diversified management
contact until the end of each prospect’s studies with
is one of our primary success factors. The proportion
KEY FINANCIAL RATIOS
Interest coverage ratio
(EBITDA / Net interest expense including interest element of pension provisions)
2006
2007
9.4
9.4
Debt coverage ratio
(Net earnings before minority interests + Amortization and depreciation +
Interest element of pension provisions / Net borrowings and pension provisions)1)
48.4 %
74.3 %
Equity ratio
(Equity / Total assets)
41.6 %
43.7 %
0.58
0.41
Gearing
(Net borrowings and pension provisions / Equity)
1)
hybrid bond included on 50 percent equity basis
44
Annual Report 2007
(at December 31)
Europe/Africa/Middle East
2003
34,189
%
2004
70.3 33,692
%
2005
%
2006
%
2007
%
65.8 33,731
64.2 33,799
64.7 34,166
64.3
North America
4,181
8.6
6,772
13.2
7,271
13.8
6,651
12.7
6,438
12.1
Latin America
3,946
8.1
4,325
8.5
4,208
8.0
4,297
8.2
4,268
8.1
Asia-Pacific
Total
6,312
13.0
6,411
12.5
7,355
14.0
7,545
14.4
8,235
15.5
48,628
100.0
51,200
100.0
52,565
100.0
52,292
100.0
53,107
100.0
of non-German personnel among our managerial staff
return to their jobs. Consequently we are financially
is in excess of 70 percent. In total, there are around
supporting the provision of a new crèche facility at our
9,200 managers from 80 different countries working
Düsseldorf site for 75 children aged from 3 months
for Henkel. For Henkel as an internationally structured
to 6 years. From August 2008, Henkel will be able to
corporation, diversity management has a long tradition
provide employees in Düsseldorf with a total of 165
as part of our corporate culture. The proportion of
nursery places.
employees working for us outside Germany is steadily
In order to meet the challenges of current demo-
increasing and currently stands at around 81 percent.
graphic developments, Henkel offers in particular
Consequently, it is very important for Henkel to under-
older employees in Germany a wide range of health-
stand and respect the different cultures and potentials
care models. These include preventive medical check-
both of our employees and also of the markets in which
ups and advisory services to facilitate adoption of a
we operate. This appreciation is one of the pillars sup-
healthy lifestyle and the transition from active career
porting our vision and values, and the need for respect
to retirement.
is also explicitly specified in both our “Code of Teamwork and Leadership” and our “Code of Conduct”.
The Management Board of Henkel has publicly committed to the principles of diversity, e.g. by signing the
In recognition of our comprehensive measures in
this field, Henkel received from the charity “Hertie
Stiftung” full certification in November 2007 as a
family-friendly company.
“Diversity Charter”. In 2007, Henkel established an or-
In the year under review, we subjected our Human
ganizational unit under the heading “Global Diversity
Resources division to an external benchmark study. The
Management” which implements and coordinates all
results were incorporated within a worldwide project,
the measures in this regard on a worldwide scale.
the aim of which was to harmonize our structures and
One of the primary purposes of diversity manage-
processes in the human resources field and to achieve
ment is to reconcile the demands of family life on the
a sustainable increase in efficiency. Now, with a clear
one hand and those of work and a professional career
distinction being made between the strategic and the
on the other. A major aspect within this context is that
operational activities of Human Resources, we are able
of childcare provision, particularly for children under
to support our business sectors and corporate functions
three years, as a means of enabling parents to quickly
to even better effect.
EMPLOYEES BY FUNCTION
EMPLOYEES BY BUSINESS SECTOR
Research and Development 5 %
Production and
Engineering 47 %
Corporate 14 %
Laundry & Home Care 26 %
Administration 16 %
Marketing, Selling
and Distribution 32 %
Adhesives Technologies 44 %
Cosmetics/
Toiletries 16 %
Annual Report 2007
45
EMPLOYEES
Procurement
ing portfolio and thus achieve optimum fulfillment
with respect to our strategic requirements and vendor
Like 2006, fiscal 2007 was characterized by the strained
pool. Our five most important raw material groups
situation prevailing in the markets for raw materials
are surfactants, raw materials for polyurethane-based
and packaging. Our expenditures on raw materials,
adhesives, plastisols for use in adhesives and sealants,
packaging and merchandise amounted to 5.2 billion
materials for the manufacture of hotmelt adhesives,
euros while the cost of external services was 0.5 billion
and inorganic commodities for use in manufactures
euros. In all, therefore, the cost of materials increased
such as detergents and surface pre-treatment products.
from 5.6 billion euros in 2006 to 5.7 billion euros. This
These account for around 26 percent of our total cost of
was primarily due to increased production volumes. We
materials. Our five largest suppliers account for around
were able to largely offset price increases with respect
13 percent of our cost of materials.
to individual raw materials through globally coordinated cost-reduction measures applied to our entire
Production
procurement portfolio.
A major factor for success in this regard is a cross-
Henkel has production sites in 52 countries around
functional and cross-divisional project management
the world. Our largest facility is in Düsseldorf where
approach in which Purchasing collaborates with the
we manufacture detergents and cleaning products as
business sectors, Research & Development and Sup-
well as adhesives for the DIY and craftsmen segments
ply Chain Management. The procurement platform
and products for our industrial customers.
thus created will also enable us in the future to meet
The largest production site serving the Laundry &
the global challenges arising from short and volatile
Home Care business sector is located in West Hazle-
procurement markets.
ton, Pennsylvania, USA, and is primarily for the manu-
In order to further reduce our dependency on
facture of liquid detergents. In the case of Cosmetics/
market price developments and market-dominating
Toiletries, the largest facilities are in Wassertrüdingen,
vendors, our globally active purchasing teams in col-
Germany (body care and hair care), and Aurora, Illinois,
laboration with the business sectors are constantly
USA, which – in addition to soaps – also now produces
analyzing, testing and certifying new raw materials and
deodorants following the acquisition of the Right Guard
suppliers. The latter also support us in the development
brands portfolio. The largest sites manufacturing on
of innovative products.
behalf of the Adhesives Technologies business sector are
We place strict requirements on existing and new
located in Heidelberg, Germany, where a wide range of
vendors, applying criteria such as price and cost effi-
adhesives and sealants are produced, and Dublin, Ire-
ciency, product quality, risk management, innovation
land, with a portfolio of high-quality specialty adhesives
potential and delivery reliability. As part of our supply
for industrial and consumer applications.
base management and supplier relationship manage-
For large-volume products, Henkel strives to reduce
ment approach, we conduct a fact-based dialog with
transport costs and the associated environmental bur-
suppliers in order to continuously improve our sourcCOST OF MATERIALS BY BUSINESS SECTOR
COST OF MATERIALS BY TYPE
External Services 9 %
Supplies
and Merchandise 12 %
46
Annual Report 2007
Packaging 23 %
Raw Materials 56 %
den through the establishment of local production sites.
neering technology. In addition to the fundamental
Where compact products with a low specific weight are
investigative work done in Düsseldorf, our research
concerned, the cost of transportation becomes less of
companies SusTech in Darmstadt, Germany, and Henkel
a factor so that these are produced at central, highly
Kindai Laboratories in Iizuka, Japan, also make impor-
automated facilities wherever possible.
tant contributions to our innovation pipeline, with
We are also permanently engaged in the improve-
developments in the fields of nanotechnology and
ment of existing and the development of new plants,
functional polymers. One of the main areas of activ-
processes and structures for the purpose of constantly
ity of our research company Phenion in Düsseldorf
enhancing the safety of our sites while reducing re-
lies in the development of alternatives to animal test-
source consumption and environmental burden. More-
ing – e.g. using skin models as a basis – in the quest to
over, comprehensive measures aligned to increasing
ensure the toxicological harmlessness of raw materials
product quality and production efficiency have been
and ingredients. In order to accelerate the validation
implemented in all our business sectors. As a result,
and recognition of such substitute methods by the
we have been able to further improve on many of our
legislators, Henkel and Phenion are actively participat-
environmental parameters (for more details, see “Sus-
ing in the project “European Partnership for Alterna-
tainability” starting on page 50), while at the same
tive Approaches to Animal Testing” (EPAA), which is
time achieving additional increases in productivity
jointly supported by the European Commission and
based on per capita output volumes.
industry.
In our new “Scientific Computing” competence
Research and Development
center in Düsseldorf, we are working with computeraided models on finding solutions to R&D problems of
Expenditures on research and development at Henkel
relevance to Henkel. On the technological side, supply
amounted to 350 million euros in the year under re-
chain process optimization using new production,
view, compared to 340 million euros in 2006. The R&D
automation and simulation techniques constitutes a
ratio expressed as a share of sales remained unchanged
major strategic focal point.
at 2.7 percent. Of the total, we spent 36 million euros on
Aside from the research areas already mentioned,
corporate research and 314 million euros on the prod-
our scientists are also, for example, working on the
uct and process development activities of the business
following projects:
sectors. As an annual average, the number of employ-
» Development of innovative ingredients including
ees working in research and development at our sites
further optimized enzymes for achieving specific im-
around the world was 2,794, the majority of whom are
provements in laundry and cleaning performance
deployed in Germany and the USA. In China, we have
» Research into new technologies for optimizing the
expanded our Shanghai facility as a central research
fermentative manufacture of enzymes and other
site serving all three of our business sectors.
biomolecules (“white biotechnology”)
We utilize all available sources of information in
» Investigation into the molecular mechanisms of odor
our research and development activities in order to
generation by bacteria in order to develop e.g. gentle
secure the success of the corporation going forward.
deodorants and oral care products
We strengthen and expand our portfolio and develop
» Development of new biological and chemical tech-
new markets using both internal and external exper-
nologies for hair coloration, hair styling and hair
tise. Through their work, our scientists and engineers
care applications
lay today’s basis for tomorrow’s successes, safeguard-
» Development of innovative composites for use in the
ing Henkel’s innovation capabilities and securing our
aircraft, automotive and electronics industries for the
earning power into the future.
purpose of weight reduction and energy savings
In our Corporate Research division with its longterm alignment, we work within a worldwide research
network in the fields of chemistry, biology and engi-
Annual Report 2007
47
R&D EXPENDITURES
in million euros
R&D EXPENDITURES BY BUSINESS SECTOR
400
300
257
272
324
340
350
2006
2007
Corporate Research 10 %
200
100
0
2003
2004
2005
R&D ratio
2.7 %
2.6 %
2.7 %
2.7 %
(research expenditures as a proportion of sales)
2.7 %
All the results achieved are fed into the business sectors.
Cosmetics/
Toiletries 17 %
» Morphology Control in Benzoxazine Polymers
This has led to our current research effort yielding eight
Innovative adhesive composites with improved proper-
exceptional projects, the recipients of our “Research/
ties offer new application possibilities in, for example,
Technology Invention Awards” for 2007. Each of these
the aircraft industry
outstanding projects provides Henkel with new poten-
» Multifunctional Hydrogel Coatings
tial for business development or cost reduction:
With our HydroSTELLAN® system of chemical build-
» Low-temperature Protease
ing blocks, it is possible to modify – to an extent previ-
Using a new screening system and genetic engineering processes, our scientists have discovered an enzyme for liquid detergents which, even under cold
ously unknown to science – surface properties such
as water runoff, and dirt and bacteria repulsion
» QVis – Visual Process and Quality Control
wash conditions below 20°C, exhibits a higher level
for Filling Lines
of performance compared to the enzymes currently
With advanced image processing technologies, new
employed
possibilities are opening up for operational control
» Controlled Fragrance Release
and quality optimization in filling lines
Innovative classes of chemical fragrance significantly
prolong the olfactory effect as well as facilitating the
Each year, we select a number of our more significant
development of new fragrance creations
developments for our “Fritz Henkel Award for Innova-
» Hair Life Cycle Management – Forever Young Hair
tion”. In 2007, this accolade went to three interdisci-
Using a unique, fully automatic test system, our re-
plinary project teams in recognition of their efforts in
searchers simulate in fast motion the external aging
the realization and commercialization of the following
process undergone by hair, providing new concepts
concepts:
for hair cosmetics
» 100 Years of Persil: Superior premium quality with a
» Aged Hair – Technologies for Anti-Aging Hair Care
new brand concept; improved formulation featuring
Through a combination of in-vitro and in-vivo test
an exclusive active stain remover; new packaging and
methods, differences have been identified in aged
innovative design
hair, and active ingredients found to combat the hair
aging process
» Taft Volume Power: Up to 100 percent more hair volume from the roots up thanks to high-performance
» New Class of Raw Materials for Labeling Adhesives
polymers which, together with the moisture protec-
A new class of synthetic polymers has opened up the
tion ingredient chitosan, provide the hair with up to
way to a cost-efficient and high-performance alternative to current labeling adhesives
48 hours of effective hold
» Crash-resistant Structural Adhesives: Vehicles are
rendered safer and lighter with Terokal adhesives
which, as the first of their type, retain their ductility
and resilience at temperatures from –40°C to +90°C
48
Annual Report 2007
In marketing, however, we focus on the requirements
LARGEST R&D SITES1)
Rocky Hill,
USA
Dublin, Ireland
Düsseldorf, Germany
Hamburg, Germany
Shanghai, China
of the end consumer. Our Marketing unit initiates innovation processes and applies knowledge acquired
from market research and analysis activities. It also
develops and implements media strategies and advertising formats aligned to the consumer.
At the Cosmetics/Toiletries business sector, our
Scottsdale,
USA
marketing strategies are centrally planned and globally implemented with respect both to our consumer
brands and the hair salon business. Our sales and dis-
1)
based on number of R&D employees
tribution activities, on the other hand, are managed
We protect our technologies around the world with
addressed through media advertising and point-of-sale
more than 7,000 patents. We also have roughly 5,000
activities. Consumers purchase our products via the
patent applications pending, and we have around
retail trade, and the main distribution channels are
2,500 registered designs safeguarding our intellectual
specialist drug stores, grocery outlets and department
property.
stores. Our customers in the hair salon business are
Further information on our research and develop-
served by a dedicated field sales force who also dem-
ment activities can be found on our website at www.
onstrate product applications and provide technical
henkel.com/innovation.
advice at the local level. We further offer specialist
seminars and training courses at our 37 Schwarzkopf
Marketing and Distribution
Academies around the world.
Our Adhesives Technologies business sector serves
As indicated by the theme of this year’s annual report
private households, do-it-yourselfers and craftsmen, as
– “A World of Customers” – it is our customers and
well as small and medium-sized industrial companies
consumers who are at the focus of all our thoughts
and multinational corporations.
and actions. Consequently, we align our marketing
For the most part, our customers are handled direct-
and distribution activities in each of our business sec-
ly by our own sales force. By “customer”, we refer to our
tors to the respective requirements of these primary
direct customers in the form of industrial companies,
target groups.
distributors or trade outlets. While supermarkets, DIY
At Laundry & Home Care, our marketing activities
stores and specialty retailers are essential to the private
are controlled from headquarters and the regional com-
user, professional craftsmen tend to purchase from
petence centers. Our sales and distribution activities,
various types of specialty wholesaler. Major, globally
on the other hand, are managed on a country-specific
active customers such as automobile manufacturers
basis and coordinated at the regional level.
or large retail chains are centrally supported by key
Our direct customer grouping in this business
account management teams. As many of our products
segment is the grocery retail trade with distribution
require explanations of a technical nature, our Techni-
channels in the form of supermarkets, mass merchan-
cal Customer Service plays an important role in the
disers/hypermarkets and discount stores. In Western
overall process. This unit has detailed knowledge both
Europe, drug stores are also extremely important, while
of the properties of our products and their application,
in the markets outside Europe and North America, a
and can thus assist our customers in everything from
large proportion of sales continues to be channeled
the choice of the right product and its usage, to fine
via wholesalers and distributors. As the trade’s first
adjustment of their production processes.
point of contact, the Sales unit provides a full range
of competences in serving our customers.
For us, communication with end users is also of
central importance. While our marketing strategy is
Annual Report 2007
49
according to national criteria. Consumers are primarily
developed at the global or regional level, implementa-
wellbeing of society. Moreover, through their contribu-
tion of the measures takes place at the national and
tion to sustainable development, they also enable our
local level. In the case of the private consumer, we
customers and consumers to experience for themselves
chiefly use media advertising with complementary
how we combine leading brand quality with respect
promotional and support activities at the point of sale.
for people and the environment. Our common focus
We serve professional craftsmen and industrial cus-
and credible engagement within the marketplace
tomers primarily through our sales organization with
strengthen our brands as well as the reputation of our
technical support, product demonstrations, training
company. Indeed, Henkel as a whole embodies commit-
courses and regular appearances at key industrial fairs.
ment to sustainability and corporate social responsibil-
The internet is also becoming increasingly important
ity. Through our dedication to these ideals, we are able
as a platform for marketing and communication. Our
to create an important basis for enhancing the trust
websites contain not only information relating to our
in which our brands and technologies are held – thus
products and services but also order processing por-
further promoting their success.
tals for our customers, including wholesalers, retailers
The Henkel Management Board bears overall re-
and distributors. We utilize a combination of classic
sponsibility for the corporation’s sustainability policy.
information brochure and website page in order to
An internal Sustainability Council steers our global
awaken interest among our industrial customers for
activities in collaboration with our operating business
our system solutions.
sectors, our corporate functions and also the regional
and national companies.
Sustainability/Corporate Social
Responsibility
In signing the “Global Compact” of the United Nations in July 2003, we also made public our determination to uphold human rights, including basic workers’
Henkel is dedicated to sustainability and corporate
rights, to promote environmental protection and to
social responsibility. We clearly state this principle as
oppose all forms of corruption. Our understanding of
one of the corporate values binding on all our employ-
socially responsible behavior has been specified and
ees. We generate sales and profits while behaving in a
communicated to the entire corporation through our
socially responsible manner – in all our activities and
“Code of Corporate Sustainability” and our “Code of
along the entire value chain. We are convinced that
Conduct”. From these codes are derived our more de-
effective environmental protection together with social
tailed internal SHE standards governing safety, health
and societal responsibility are, in the long-term view,
and environmental protection, our social standards
essential to our entrepreneurial success.
and our Group purchasing directives. Adherence to
For decades, finding the right balance between eco-
the associated requirements and regulations is regu-
nomic, ecological and social aims has been a major
larly examined by corporation-wide internal audits. In
priority at Henkel. We have aligned our research and
addition, Henkel companies have their management
development work to constantly improving our brands
systems externally certified where this yields competi-
and technologies and their ability to make people’s lives
tive advantage. At the end of 2007, 57 percent of our
easier, better and more beautiful. The needs of a con-
production volume was generated at sites certified in
stantly growing world population and the availability
accordance with the worldwide environmental man-
of water, energy and other resources are issues that are
agement standard ISO 14001.
going to become ever more important for humanity in
Day in, day out, people in more than 125 countries
general, as well as exerting a direct influence on our
around the world put their trust in Henkel brands and
business development through energy and raw mate-
technologies. First-class quality means more than conve-
rial price increases.
nience and high product performance. It also includes
Our brands, technologies and services are the prime
comprehensive product safety and environmental com-
contributions made by our company to the wealth and
patibility. Consequently, right from the initial research
50
Annual Report 2007
SUSTAINABILITY PERFORMANCE 2003 – 2007
Our performance in relation to sustainability and cor-
Environmental indicators relative to production volume
porate social responsibility was again recognized by
Heavy metals
–57 %
relevant external experts in the year under review.
Waste
–32 %
Our accomplishments in this domain are reflected
Energy
–21 %
in various regional and global sustainability ratings.
Sulfur dioxide
–17 %
For example, we have been incorporated in the Dow
Water
–15 %
Jones Sustainability World index. We also appear in
Carbon dioxide
–15 %
the European Dow Jones Stoxx Sustainability index
Volatile organic compounds
–9 %
Wastewater contamination
15 %
as the “Sustainability Leader” in the market sector
“Non-Durable Household Products”. Our inclusion
in the FTSE4Good index has also been confirmed. In
INDUSTRIAL ACCIDENTS 2003–2007
Industrial accidents per million man-hours
–72 %
September 2007, Henkel was chosen as one of just 50
corporations worldwide for the newly created “Global
ing” covering the 120 largest corporations in Europe,
used as intended, our products and technologies are
Henkel took second place, as we did in the DAX 30
safe and have no adverse effects on either health or
sustainability ranking published by the sustainability
the environment.
rating agency scoris.
Again in the year under review, we were able to im-
Future-viable solutions geared toward sustainable
prove on important parameters relating to our sustain-
development can only be found in consultation and col-
ability performance. Our savings on the energy consump-
laboration with all social groupings. In order to be able
tion front help to alleviate the influence of increasing
to take into consideration and evaluate the interests of
energy prices and – through the associated reduction
these different communities on a case-by-case basis, we
in carbon dioxide emissions – assist in attainment of
constantly seek dialog with all our stakeholders at the
national climate protection goals in the countries in
local, regional and corporate level. These include our
which Henkel operates. The manufacture of our prod-
employees, shareholders, customers, suppliers, public
ucts is not very energy-intensive, nor does it result in
authorities, trade associations and non-governmental
the emission of excessive volumes of greenhouse gases.
organizations, as well as science, academia and the
Often the main energy requirement arises with applica-
public at large.
tion of our products. As an innovative company, we see
We deploy a wide range of communication instru-
opportunities and potential competitive advantage with
ments so as to meet the specific information require-
energy-efficient products for household and industrial
ments of our stakeholders and target groups. Detailed
applications, and with adhesives and sealants for new
analyses and background information on the subject
energy sources such as fuel and solar cells.
of sustainability can be found in our Sustainability
As a responsible corporate citizen, Henkel provides
Report which we publish on an annual basis. With
financial and material support for projects aligned to
this, we document the high priority assigned to sus-
social welfare, the environment, education, science,
tainability by the corporation, at the same time satisfy-
health, sport, art and culture. Such contributions ema-
ing the reporting obligations laid down in the “Global
nate both from our corporate headquarters in Düssel-
Compact” of the United Nations.
dorf and from our local sites.
Further information, reports, background details
Since 1998, moreover, we have been active in sup-
and the latest news on sustainable development at
porting the voluntary work performed by our employees
Henkel can be found on our website www.henkel.com/
and retirees. Under our worldwide MIT initiative (Make
sustainability.
an Impact on Tomorrow), Henkel supported a total of
1,301 charitable projects in more than 62 countries in
2007, of which 246 were children’s projects.
Annual Report 2007
51
Challenges” index. In the “2007 Good Company Rankand product development stages, we ensure that, when
Group Management Report Laundry & Home Care
Successful with our customers:
brands, innovations and advice create added value
Customer relations management –
reaping the benefits of tailored solutions
Understanding retail strategies is crucial for a successful partnership. Excellent category
management derives from in-depth analysis of all the market data, incorporates the category
goals of the retail partner, and extends through to placement on the shelf – promoting success for Henkel and our trade customers.
52
Annual
Report 2007 2007
Der Henkel
Geschäftsbericht
Laundry & Home Care
KEY FINANCIALS1)
4,088
4,000
3,000
3,074
4,117
4,148
3,617
2,000
1,000
in million euros
2006
2007
+/–
Sales
4,117
4,148
0.8 %
Proportion of Henkel sales
32 %
32 %
0 pp
449
459
2.1 %
10.9 %
11.1 %
0.2 pp
Return on capital employed
(ROCE)
15.2 %
16.7 %
1.5 pp
153
183
19.3 %
EVA®
0
2003
2004
2005
2006
2007
» Organic sales growth of 5.5 percent
» Operating profit increase of 2.1 percent,
4.5 percent currency-adjusted
» Return on capital employed improved
to 16.7 percent
1)
so pass on the rise in raw material and packaging costs
that occurred in the course of the year.
In our markets, the continued growth encountered
in our most important region of Western Europe, and
particularly Germany, was encouraging. This development was due not least to the success of our Persil
Economic Environment and Market Position
centennial activities. Together with the retail trade, we
Our market for laundry and home care products was
succeeded in turning consumers back to brand prod-
valued at about 82 billion euros in 2007, once again
ucts in ever greater numbers. In the case of heavy-duty
growing by more than 3 percent. Market expansion was
detergents, private labels experienced their first down-
extensively volume-driven while average price levels
turn for several years. The markets in Eastern Europe
stagnated.
once again posted a significant double-digit percent-
This is attributable firstly to the general competitive
age growth rate. Here, sales in special detergent and
environment prevailing in our hard-fought markets,
household cleaner categories grew substantially faster
and secondly to a desire among our customers to avoid
than in the case of the more established heavy-duty
retail price increases. This combination of factors meant
detergents and hand dishwashing products.
that it was either not possible or in many cases only
Compared to previous years, there was a slowdown
possible with a delay to implement price increases and
in the dynamics of the North American market attrib-
WORLD MARKET FOR LAUNDRY AND HOME CARE
PRODUCTS
SALES DEVELOPMENT1)
Detergents 54 %
Insecticides 6 %
2007
in percent
Air Fresheners 7 %
0.8
Foreign exchange
–2.3
3.1
Acquisitions/divestments
–2.4
Organic
1)
Cleaning
Products 33 %
5.5
Annual Report 2007
53
Group Management Report/
Business Sectors
SALES
in million euros
utable to increased price competition. With our Purex
in North America was characterized by a highly com-
brand, we are well positioned in this respect.
petitive environment which adversely affected organic
The Laundry & Home Care business sector occupies
leading positions in our markets worldwide.
sales growth.
We posted our highest growth rates in Eastern Europe, further extending the leading market positions
Business Activity and Strategy
we occupy in this rapidly expanding region. Develop-
In keeping with our strategy to sharpen our focus on
ments in Africa and the Middle East were similar, with
the laundry and home care brand products business,
our strong positions in Algeria and Egypt yielding par-
we disposed of a number of marginal activities in the
ticular benefits. Within the Asia-Pacific region, the
year under review. These included our European pri-
performance of our business in India was especially
vate label operation and our oils and fats business in
gratifying. Thanks to successful new product launches,
Turkey. Aside from our core markets for detergents
we were able to achieve growth rates that outpaced
and cleaning products, we are also active in a number
even that rapidly growing national market.
of selected regions in the air freshener and insecticide
segments.
We increased operating profit (EBIT) by 2.1 percent
to 459 million euros, the rise after adjusting for foreign
In the year under review, we were able to further
exchange amounting to 4.5 percent.
increase our market share in our categories, with EBIT
Again in the year under review, we registered an
growing faster than sales. Our objective is to continue
increase in the price of raw materials and energy. How-
along the road of profitable growth. Therefore, our
ever, through a number of globally instigated cost-re-
focus is on expanding our market positions in our
duction and efficiency-enhancing measures, we were
most important markets of Western Europe and North
able to extensively compensate for the additional ex-
America, and on further improving profitability in
pense. Thanks to our increasing focus on high-margin
our growth regions. In the established markets, our
businesses and the economies of scale arising from
innovation capability is of major importance, while
our encouraging sales performance, we were able to
in our growth regions, our primary aims are to drive
improve return on sales by 0.2 percentage points to
economies of scale and to increase the penetration of
11.1 percent.
our international brands.
We improved return on capital employed (ROCE) by
1.5 percentage points to 16.7 percent. Aside from posi-
Sales and Profits
tive profit developments, further optimization of our
Despite the disposal of certain marginal businesses,
net working capital and the divestment of marginal
we were able to increase sales by 0.8 percent to 4,148
businesses contributed to this improvement.
million euros. Organic growth amounted to an encouraging 5.5 percent, with the Europe/Africa/Middle East
Business Segments
region making a major contribution. In Western Eu-
We generated good organic sales growth in both Laun-
rope, we benefited in particular from the “Best Ever”
dry and Home Care in the year under review.
campaign which embraced not only the centennial
Within the Laundry segment, the increase in rev-
of our largest brand Persil but also a brand relaunch
enues was primarily due to our heavy-duty detergents
of our other premium detergents in Europe. Business
and fabric softeners. Heavy-duty detergents benefited
54
Annual Report 2007
from the activities initiated to mark the Persil centen-
ments were made in information technology and in
nial. As part of a broad relaunch, the brand was once
ensuring compliance with safety and environmental
again improved in terms of performance, fragrance
standards.
experience and design aesthetics. Harmonized with
In all, we invested 168 million euros in property,
these developments, we also modernized and standard-
plant and equipment compared to 139 million euros
ized the brand identity of our premium West European
in the previous year.
detergents Dixan, Le Chat and Wipp.
Outlook
due to developments on our European markets. Our
We expect our markets to expand by around 3 percent
successful brands Vernel and Silan also profited from
in 2008. We expect further increases in raw material
the introduction of further new fine fragrances.
prices and do not foresee any relief in the energy and
A major contribution to the good sales performance
transportation cost situation. We intend to compensate
of our Home Care business in the year under review was
for such developments with price increases of our own,
made by our dishwashing and WC products. In the
greater emphasis on our high-margin products and
case of our machine dishwashing detergents, Europe
ongoing efficiency improvements.
was the mainstay of the improvement in revenues. The
Against this background, we expect organic sales
launch of Somat 7, offering – in addition to the func-
growth in 2008 to again be above the market aver-
tions of Somat 5 – a cleaning booster and an activator
age, accompanied by a further increase in operating
for improved results at low temperatures, was very
profit.
successful. Double-digit percentage growth rates in
We see particular opportunities arising from con-
Eastern Europe resulted in an increase in our market
tinued dynamic development in the Eastern European
share in that region. Our hand dishwashing detergents
markets and look forward to disproportionate increases
continued their upward trend both in Europe and –
in our own results arising from our strong market posi-
particularly – in our growth regions. Our WC products
tion in this region. In addition, we anticipate positive
also generated strong sales growth, with Eastern Europe
effects from the expansion of our market positions in
once more providing the regional lead. Our air fresh-
the growth regions. The primary risks lie in a further
eners again performed well, with sales boosted both
increase in relevant raw material and energy prices
by encouraging developments in North America, our
and a further intensification of price-led competition
largest market, and by stronger penetration of these
in Europe and North America.
products in various other countries.
Investment was primarily geared to expanding our
European manufacturing base for liquid products. Capital expenditures also arose as a result of the relocation
of some of our powder detergent production operations
and the modernization and merger of certain research
and administrative facilities. Other significant invest-
Annual Report 2007
55
Business Sectors
The increase in fabric softener sales was primarily
Group Management Report Cosmetics/Toiletries
Shopper marketing –
at the forefront of retail evolution
Operating closely with our customers, we are developing new retail
experiences and brand-building models. Innovative shopper marketing
concepts effectively influence the decision to buy at the in-store product
shelf, creating added value for our trade partners.
56
Annual Report 2007
KEY FINANCIALS1)
3,000
2,477
2,500
2,000
2,629
2,864
2,972
2,086
1,500
1,000
500
in million euros
2006
2007
+/–
Sales
2,864
2,972
3.7 %
22 %
23 %
1 pp
359
372
3.8 %
12.5 %
12.5 %
0 pp
(ROCE)
15.4 %
16.7 %
1.3 pp
126
149
18.3 %
®
EVA
0
2003
2004
2005
2006
2007
» Operating proﬁt increase of 3.8 percent,
to 16.7 percent
1)
participate. Our share of the market expansion undergone by the Asia-Pacific region was below average due
to our structural focus on Japan and Australia with
their partially stagnating markets. In Latin America,
we were able to outpace market growth through our
selective regional presence.
The international hair salon market also under-
Our cosmetics market was valued at around 132 billion
went positive development. Here again, the growth
euros in 2007, an increase of some 2.5 percent versus
drivers were the markets of Eastern Europe and Latin
the previous year. While the growth rates encountered
America. As a globally aligned, innovative salon special-
in the markets of Western Europe and North America
ist, Schwarzkopf Professional enjoyed above-average
were below this mark, our own were disproportionately
participation in this growth, further expanding its
high. Supported by positive developments in the hair
position as the number three in the global market.
cosmetics segment and in our body care business, we
were able to significantly expand our market positions
Throughout the world, our Cosmetics/Toiletries business sector holds leading positions in our markets.
in Western Europe, gaining market share in the process.
In North America, we succeeded in substantially ex-
panding our position in the body care segment thanks
The Cosmetics/Toiletries business sector is active both
in part to the successful integration of the Right Guard
in the branded consumer goods segments of hair cos-
brands portfolio. Eastern Europe exhibited strong mar-
metics, body care, skin care and oral care, and in the
ket growth rates in which we were able to successfully
professional hair salon business. Our intention is to
WORLD MARKET FOR COSMETICS/TOILETRIES
SALES DEVELOPMENT1)
Hair Cosmetics and
Salon Products 33 %
2007
in percent
Oral Care 11 %
3.7
Foreign exchange
–2.4
Skin Care 30 %
0.3
Organic
5.8
1)
Body Care 26 %
6.1
Annual Report 2007
57
Business Sectors
SALES
in million euros
further expand the brands business on a regional basis
Our strategy of expanding and further strengthening
with the emphasis on developing our strong market
our core businesses and key competences is aligned to
positions in Western and Eastern Europe and North
the objective of achieving further, continuous improve-
America, accompanied by specifically focused activi-
ments in profitability.
ties in Asia. Further growth in Eastern Europe is to be
achieved primarily through organic expansion derived
Sales and Profits
from the broad base that we have now established.
With an organic sales growth rate of 5.8 percent, the
And we will be resolutely pursuing the globalization
Cosmetics/Toiletries business sector recorded a new
strategy of our hair salon business.
high, at the same time also significantly outstripping
We intend to achieve growth primarily through the
market growth. Results here were influenced not only
organic expansion of our businesses, and especially
by foreign exchange parities but also the divestment
through the development and rapid commercializa-
of the non-core fine fragrance business Morris Profumi
tion of innovative products. We will continue looking
S.p.A., Milan, Italy, effective March 30, 2007. The net
at appropriate acquisitions to supplement our organic
effect was a nominal increase in sales of 3.7 percent to
growth strategy in both our branded consumer goods
2,972 million euros. Our business in Western Europe
and our professional businesses.
likewise grew substantially faster than the market. In
As proponents of the active portfolio management
Eastern Europe, we were able to continue our strong
approach, we also regularly scrutinize our businesses,
growth performance with a further double-digit per-
disposing of non-strategic marginal activities as appro-
centage increase in revenues. We also posted appreciable
priate. One such was our fine fragrance business Morris
growth in the Middle East and in Latin America. Our
Profumi S.p.A. of Italy, a non-core operation which we
sales performance in North America reflected expan-
divested as of March 30, 2007.
sion in our Dial business and the successful integration
At the same time, we are focusing on the interna-
of the Right Guard brands portfolio. Similarly, the hair
tional expansion of our core branded consumer goods
salon business experienced organic growth well above
businesses hair cosmetics, body care, oral and skin care.
market expansion.
The emphasis in our hair cosmetics strategy is on fur-
At 372 million euros, operating profit (EBIT) was
ther developing our leading umbrella brand Schwarz-
3.8 percent above the prior-year figure, and 6.6 percent
kopf and driving consumer-led innovation in the core
up after adjusting for foreign exchange. As a result
product categories of colorants, hair care and styling.
of further cost reduction measures, we succeeded in
In our body care business, we intend to build on the
limiting the burden of rising raw material prices. At
momentum generated by the latest market successes
12.5 percent, return on sales remained at the high level
achieved in Europe through our innovation offensive;
of the previous year.
in North America we are concentrating on the expan-
Return on capital employed (ROCE) increased by
sion of our core brand Dial and the Right Guard brands
1.3 percentage points to 16.7 percent, not only as a re-
portfolio acquired in 2006. In growing our successful
sult of the rise in profits but also and particularly due
skin care brand Diadermine, we will be concentrating
to a significant reduction in capital employed arising
on Europe, as we will in the further development of our
from a strict working capital management regime.
oral care business. Our hair salon business, currently
the number three in the world, is to be further strength-
Business Segments
ened with product innovations. Here we also want to
In the Hair Cosmetics business, we succeeded in gener-
develop new regional potential on a selective basis.
ating a substantial increase in sales accompanied by
market share expansion to new record levels. This per-
58
Annual Report 2007
formance was driven by our top brands in our strategic
care brand SEAH. A further major event around the
business units Colorants, Hair Care and Styling. Within
middle of the financial year was the introduction of
the colorants business, our brands Palette and Brillance
BlondMe, the first fully comprehensive concept compris-
performed particularly well. The focus in the Brillance
ing color, care and styling components developed for the
line was on our Fashion Collection, while in the case of
individual blonde. The roll-outs of our revamped styling
Palette it was the advent of the new Golden Gloss Browns
brand OSiS and the colorant brand Igora Royal likewise
series. The launch of Men Perfect, the first men’s colo-
made a positive contribution to the strong growth ex-
rant from Schwarzkopf, also attracted further market
hibited by the Hair Salon business.
interest. In the hair care business, our two core brands
Gliss and Schauma were able to substantially expand
their positions through the launch of Gliss Kur Oil Nu-
The investment emphasis in 2007 was on measures
tritive and Schauma Kiwi Glanz respectively. The new
aligned to optimizing our structures and processes.
premium hair care product Activ Dr. Hoting had a good
As part of the reorganization of our production activi-
launch. In the styling segment, our European market
ties, we closed our plant in La Coruña, Spain effective
leader Taft was augmented by Taft Volume Power and
September 30, 2007. In total, expenditures on property,
the international launch of Drei Wetter Taft Sensitive.
plant and equipment for the year amounted to 69 mil-
The innovative new lines introduced under the trend
lion euros compared to 49 million euros in 2006.
brand got2b further boosted growth.
Outlook
form well, with our two major brands Dial and Fa suc-
We expect our cosmetics market to expand by around
cessfully continuing their innovation offensive. The
2 percent in 2008. Western Europe is likely to continue
introduction of Fa Naturals in shower gel and deodorant
exhibiting no more than minor market growth within
form as a complement to the successfully established
an intensely competitive environment. North America
yogurt range generated brisk demand throughout
and Eastern Europe are likely to be the growth drivers
Europe. Dial increased sales and extended its market
for our business.
position thanks to the new yogurt variants of its liquid
We expect organic sales growth in 2008 to be above
and foam soap products and the successful Dial for Men
the market average. Our objective is to expand our
range. Right Guard also made significant inroads into
market positions, particularly in Europe and North
the US deodorant market.
America. At the core of our growth strategy is our on-
The Skin Care business benefited from the success of
our main brand, Diadermine, enabling us to expand
going innovation offensive. We again expect to achieve
an increase in operating profit.
our market positions across Europe. This encouraging
We see opportunities arising primarily from our
development was due primarily to the anti-aging in-
participation in the disproportionate expansion of the
novation 1000 Microliftings of the Lift+ series, and the
markets of Eastern Europe and Latin America, and in
launch of a premium line in the form of Diadermine
further reducing our process-related production, sup-
Age ExCellium with caviar protein complex.
ply chain and administrative costs.
In the Oral Care business, we achieved good results
From our point of view, the risks lie in increasing
with our Theramed brand thanks to new Theramed
competition in already highly competitive markets, par-
2in1 freshness variants and the international launch
ticularly in Western Europe. There is also the possibility
of Theramed Titan Fresh.
of further increases in energy and raw material prices
Our focus in the Hair Salon business was on the care
series Bonacure and the relaunch of the exclusive hair
and the risk of a decline in consumer demand for cosmetics and toiletry products in the USA and Europe.
Annual Report 2007
59
Business Sectors
The Body Care business likewise continued to per-
Group Management Report Adhesives Technologies
When it comes to sound autobodies,
Henkel sets the tone
Cars need to be quiet and sturdy. They also need to be light. Because lighter cars consume
less fuel. Right from the outset, we work together with our customers in the automotive
industry on the development of their prototypes. Innovative products under our Terophon
brand result in autobody weight reductions while enhancing the acoustic comfort of modern
automobiles.
60
Annual Report 2007
KEY FINANCIALS1)
5,510
6,000
5,008
5,000
4,000
5,711
3,979
4,237
3,000
2,000
1,000
in million euros
2006
2007
+/–
Sales
5,510
5,711
3.6 %
44 %
43 %
–1 pp
579
621
7.3 %
10.5 %
10.9 %
0.4 pp
(ROCE)
15.9 %
16.9 %
1.0 pp
214
253
18.2 %
®
EVA
0
1)
2003
2004
2005
2006
2007
» Operating proﬁt increase of 7.3 percent,
to 16.9 percent
» Acquisition of National Starch businesses
agreed
ply chain management, accounting and investment
planning but also and in particular placed operational
business responsibility under unified management at
the national and regional level.
Our markets involving adhesives, sealants and
surface treatment products had an aggregate value of
around 52 billion euros in 2007, representing a global
growth rate of 3 to 4 percent. However, the develop-
ment of our individual business segments and regions
In order to better utilize our core competences and
was once again rather mixed. The slight increase in
further accelerate growth in all regions of the world,
sales with respect to consumer adhesives in the core
effective April 1, 2007 we merged the previously inde-
markets of Western Europe and North America was
pendent business sectors Consumer and Craftsmen
well exceeded by extremely strong growth in revenues
Adhesives and Henkel Technologies into a new, single
from building adhesives in Eastern Europe, the Middle
business sector under the name Adhesives Technolo-
East, North Africa and Asia. Our industrial segments
gies. In the course of this integration process, we not
benefited from the buoyant economic conditions and
only combined the central functions such as strategic
once again registered a good level of growth across all
management, product development, production, sup-
the major sectors. Despite the difficult situation prevailing in the US automotive industry, world automobile
WORLD MARKET FOR ADHESIVES, SEALANTS AND
SURFACE TREATMENT PRODUCTS
SALES DEVELOPMENT1)
2007
in percent
Industry 44 %
Building Adhesives 36 %
3.6
Foreign exchange
–3.3
6.9
0.4
Organic
6.5
1)
Craftsmen and
Consumer 20 %
Annual Report 2007
61
Business Sectors
SALES
in million euros
production continued to increase, due primarily to
men working in construction-related trades. These
the strong expansion undergone by the Asian market.
include systems for tile laying, waterproofing and
Across all our industrial businesses, growth is driven by
façade insulation, distributed under the Ceresit brand.
the desire of our customers to achieve savings in weight
Flooring adhesive systems are marketed internationally
and volume and to improve their production processes.
under the well-known Thomsit brand.
Consequently, more and more mechanical fastening
We have pooled all our activities serving industrial
and joining techniques are destined to be replaced by
customers from a wide range of different sectors within
adhesive-based solutions in the future.
our Industry business. Our product portfolio encom-
We lead the world in our market. In view of the
passes not only the high-performance Loctite adhesives
heavily fragmented competitor landscape with over
and Teroson sealants but also our industrial cleaners
1,500 vendors and a relatively small number of global
marketed under the P3 brand. These are used in a wide
players offering a comparable product portfolio, we also
range of industries, for example the automotive sec-
see ourselves as market leader in each of the individual
tor, metalworking and in the manufacture of house-
regions. By generating an organic growth rate in 2007
hold appliances. Within the packaging and consumer
that once again was well above the market average, we
goods sectors, adhesives of the Adhesin brand are very
were able to further extend these positions. The process
popular with our customers in the paper industry and
of consolidation within the competitive environment
the graphic arts business. Under the Liofol brand, we
continued through 2007. This was apparent both from
offer high-performance laminating adhesives for the
the acquisitions made by major, internationally ac-
manufacture of composite films for food packaging.
tive corporations and from company mergers initiated
A range of high-tech adhesives under the Hysol brand
through private equity investment activity.
and soldering pastes under the Multicore brand are
used in the electronics industry for the manufacture
of microchips and printed circuit boards.
Under unified management, the Adhesives Technolo-
Our centrally managed business with its different
gies business sector serves a wide range of user groups
customer groupings, target industries and regions en-
with a considerable number of different adhesives,
ables us both to participate in growth trends and to
sealants and surface treatment products.
compensate for temporary weaknesses in individual
In the Craftsmen and Consumer segment, we serve
private households, schools, offices, do-it-yourselfers
markets, providing us with a good basis for sustainable
and stable business development.
and professional tradespeople. We offer a wide range
We intend to further strengthen our business spe-
of adhesives and sealants for refurbishment and home
cifically in Eastern Europe, Asia, Latin America, North
construction applications, such as our Pattex power
Africa and the Middle East in order to harness the dy-
adhesives, Sista sealants and Metylan home decora-
namics of these growth regions even more effectively.
tion products. For applications in the home, school
In addition to gaining entry to these markets and de-
and office, we offer adhesives under the international
veloping our businesses under our own steam, we also
brands Loctite and Pattex and also glue and correction
intend to grow through acquisitions. With the planned
products under the Pritt brand.
purchase of the Adhesives and Electronic Materials
In the Building Adhesives business, we focus on
businesses from National Starch, which together gener-
products and system solutions for professional crafts-
ated sales of around 1.85 billion euros in 2006, we will
62
Annual Report 2007
be able to strengthen our position in all our regions,
With double-digit percentage growth rates (after adjust-
and particularly Asia-Pacific where our revenues will
ing for foreign exchange), we were particularly suc-
double.
cessful in Eastern Europe, Africa/Middle East, Latin
As part of an active portfolio management ap-
America and Asia-Pacific. While the growth achieved
proach, we regularly scrutinize our businesses with
in Western Europe was good, sales in North America
the specific view of divesting any non-strategic or mar-
fell below the level of the previous year due to prevail-
ginal activities. In the year under review, for example,
ing market conditions, whereby the weakness of the
we disposed of a relatively small non-core business
construction industry and the US automotive segment
involving dry drawing soaps for the steel industry. In
had a particularly noticeable effect. We also accepted
order to further focus on our core activities involving
a decline in sales in favor of price increases and a con-
adhesives, sealants and surface treatment products,
scious shift toward businesses offering higher levels
we also divested our water treatment operation at the
of profitability.
The cost of our raw materials again increased in the
We strive to attain the position of innovation leader
year under review. We responded to this with modi-
in all our business segments as a proven route to achiev-
fications in formulations and price rises of our own,
ing sustainable and profitable sales growth. Identifying
enabling us to offset the additional expense. Operating
specific user requirements is key to the development of
profit improved by 7.3 percent to 621 million euros.
successful, market-aligned solutions; this is therefore
After adjusting for foreign exchange, earnings growth
an area to which we assign especially high priority.
was 10.4 percent. The rise was due to the compound
We have established a highly modern research, train-
effect of revenue growth, price increases and strict cost
ing and professional development center in Shanghai,
management. Return on sales improved by 0.4 percent-
China, in order to further hone our ability to provide
age points to 10.9 percent.
customer-focused products and effectively tailored sys-
With capital employed undergoing only a minor
tem solutions. This new facility is to be used not only
increase, ROCE improved by 1.0 percentage points to
for our collaborations with China’s most reputable uni-
16.9 percent.
versities but also for the training and further qualification of adhesives specialists working for our industrial
Business Segments
customers. As a resource, it will enable us not only to
We again posted a further slight increase in sales in
further enhance customer loyalty but also to apprise
our Craftsmen and Consumer business. The growth driv-
customers as to how they can use our complex adhesive
ers in this case were the power and assembly adhesives
systems successfully in their production processes.
of our international Pattex brand. Our sealants also
generated a rise in revenues. While our adhesive tapes,
Sales and Profits
paper glues and correction products under the Duck
In the year under review, the Adhesives Technologies
and Pritt brands turned in weaker results, our Loctite
business sector increased sales by 3.6 percent to 5,711
instant adhesives once again performed very well, with
million euros. Organic sales rose by 6.5 percent with the
part of the success attributable to our “Hanging Man”
result that 2007 again saw us grow substantially faster
advertising campaign.
than the market. All our business segments contributed
to these encouraging results.
Our Building Adhesives business generated by far the
strongest growth, with much of the momentum once
Annual Report 2007
63
Business Sectors
beginning of 2008.
again coming from Eastern Europe. With newly estab-
into production in the year under review. Overall, our
lished production facilities, we succeeded in meeting
capital expenditures on property, plant and equipment
the rapidly growing demand for our products. In addi-
amounted to 197 million euros compared to 207 mil-
tion to the tile adhesives and waterproofing products
lion euros in the previous year.
under the Ceresit brand, our product systems for the
thermal insulation of buildings underwent dynamic
Outlook
growth. Also suitable in modified form for the insula-
We expect overall expansion within our markets to aver-
tion of buildings in hot countries, these categories offer
age between 3 and 4 percent in 2008, with our growth
further attractive growth opportunities, especially in
regions likely to continue exhibiting the more dynamic
the Gulf region.
increases. We anticipate a slightly positive development
The Industry business segment likewise continued
in Europe. However, we do not currently foresee any
along its upward growth curve, our markets in Asia-
recovery for North America in either its construction
Pacific, Eastern Europe and Latin America making im-
businesses or its automotive industry.
portant contributions. All our operations grew, whereby
We anticipate further increases in the prices of raw
the biggest rise came from the electronics sector in the
materials and packaging, to which our response will
wake of the boom in memory modules and the trend
again be to implement selective price increases of our
toward inexpensive mobile telephones. The Loctite
own. We are also constantly working on further opti-
product portfolio for industrial maintenance, repair
mizing our formulations, taking account of new raw
and overhaul applications exhibited similar growth
materials as these become available.
rates. Our automotive business likewise expanded
Our expectations with respect to sales and profits
worldwide, despite the weakness of the US sector. Inno-
for 2008 do not take into account the planned acquisi-
vative adhesives and sealants under the Teroson brand
tion of the National Starch businesses. That said, we
– designed to increase crash safety while reducing noise
again anticipate generating organic sales growth above
and weight – made an important contribution to this
the market average, accompanied by a further increase
success. Our business serving the steel industry and
in operating profit not only as a result of the increase
manufacturers of durable goods performed very well.
in revenues but also due to measures designed to re-
With our high-quality Liofol laminating adhesives, we
duce manufacturing expense and optimize our cost
are making the most of growth opportunities within
structure.
the packaging industry, serving manufacturers of flex-
We see opportunities primarily in the further sub-
ible food packaging materials for which quality plus
stitution of conventional mechanical fastening and
safety plays a particularly important role.
joining techniques by adhesive bonding systems, and in
the sustained positive market dynamics of our growth
regions. We envisage risks arising primarily in the fu-
Our investments in 2007 were aligned to improving our
ture development of raw material prices, a worsening of
production processes and hence the competitiveness of
the sub-prime mortgage crisis in the USA and therefore
our existing manufacturing sites. We also channeled
a deterioration in the economic conditions affecting
specific investment toward strengthening our presence
our customer industries.
in our growth markets. Here, the focus was on creating
new production capacities, predominantly in Eastern
Europe where we took five new building adhesive plants
64
Annual Report 2007
RISK MANAGEMENT SYSTEM
Laundry &
Home Care
Cosmetics/
Toiletries
Adhesives
Technologies
Corporate Functions (HR, IT, ...)
Regional
Officer 1
Regional
Officer 2
Group Financial Control:
Coordination/Analysis
Regional
Officer 3
Regional
Officer ...
Risk Report
risk and, in a second stage, the net risk after taking
Opportunity and Risk Management System
recorded on a decentralized basis by our affiliated com-
At Henkel, risk management is performed on a holistic,
panies coordinated by our regional officers. The locally
integrative basis involving the systematic assessment of
collated risks are then examined by the experts of the
all opportunities and risks identified as likely to affect
business sectors and corporate functions, discussed in
our businesses. We understand risk as being a negative
the appropriate management committees and finally
deviation from a financial target or KPI resulting from
assigned to a segment-specific risk inventory. Group
an event or change in circumstances. As opportunity
Financial Control is responsible for coordinating the
and risk are essentially the two sides of entrepreneurial
overall process and also the aggregation and analysis
endeavor, opportunities generally arise from a comple-
of the inventorized risks. All the opportunity and risk
mentary view of the risk structure. Consequently, we
management procedures are supported by an intranet-
are able both to minimize potential exposure at an early
resident database to ensure transparent communica-
stage and effectively exploit identified opportunities.
tion throughout the entire corporation. Within the
Our risk management system is an implicitly integral
framework of their 2007 audit of the financial state-
component of the comprehensive planning, control
ments, the auditors examined the structure and func-
and reporting regime practiced in the individual com-
tion of the opportunity and risk management system,
panies, in our business sectors and at corporate level.
confirming its adequacy and regulatory compliance.
The principles, processes and responsibilities relating
to risk management are defined in a corporate standard
Disclosure of Major Individual Risks
that is binding throughout the Group.
General market risks arising from world economic
The additional risk reporting process, performed
developments and also specific trends in the regions
annually, begins with identifying risks using check-
and industries in which we operate are continuously
lists based on predefined operating and functional
analyzed and explicitly incorporated within our plan-
risk categories. The results are evaluated in a two-stage
ning activities. Our appraisal of these general condi-
process according to occurrence likelihood and poten-
tions is provided on page 69 under “Outlook for the
tial loss. To this end, we initially determine the gross
Henkel Group”.
Annual Report 2007
65
into account our countermeasures. Initially, risks are
The following explains in more detail the individual
insurance policies where economically viable. Gener-
risks identified within the main risk categories incor-
ally, risks in the field of production are minimized by
porated in the risk inventory. Relevant opportunities
ensuring a high level of employee qualification, estab-
are described in the “Outlook” section on page 69 and
lishing clearly defined safety standards and carrying
in the individual business sector summaries starting
out regular plant and equipment maintenance. Deci-
on page 52 in this Group Management Report.
sions relating to capital expenditures on property, plant
Economic and sector-specific risks: Weakening
and equipment are taken in accordance with defined,
market growth and increasing competition, particu-
differentiated responsibility matrices and approval
larly in the consumer goods segment, represent risks
procedures. These incorporate all the relevant special-
for our business development. We are currently ob-
ist functions and are regulated in an internal code of
serving a process of consolidation within the retail
practice requiring that such investments be analyzed
trade, resulting in increased pressure with respect to
in advance on the basis of a detailed risk appraisal.
both prices and terms of business. We are therefore
Further auditing and analytical exercises accompany-
committed to developing further innovations. We see
ing projects at the implementation stage provide the
innovative products as enabling us to differentiate
basis for successful project management and effective
ourselves from the competition, which in turn is a
risk reduction.
significant prerequisite for the continued success of
our company.
Information technology risks: We have observed a
slight increase in the risks associated with our IT opera-
Procurement market risks: Our observations indicate
tions, due primarily to the potential for unauthorized
that risk on the procurement market has significantly
access and data loss. Appropriate approval procedures,
increased, this being expressed primarily in price rises
authorization profiles and defensive technologies are
for important raw materials and packaging resources. We
deployed in order to guard against such eventualities.
are combating this development through the pro-active
Daily data back-up operations are conducted to shadow
management of our vendor portfolio and a globally en-
all critical data banks, and the resultant files are trans-
gaged, cross-divisional purchasing management capabil-
ferred to another site. We also carry out regular restore
ity. We enter into strategic partnerships with vendors of
tests. External attacks that took place in 2007 – for
important and price-sensitive raw materials in order to
example in the form of hacking, spamming or viruses
minimize the concomitant price risks. We are also work-
– were successfully repelled by the security measures
ing hard within interdisciplinary teams (Research and
implemented and therefore had no disruptive effect
Development, Supply Chain Management and Purchas-
on our business processes. Moreover, Henkel has put
ing) in order to devise alternative formulations and differ-
in place a globally binding internal IT code of practice
ent forms of packaging that will enable us to respond to
to which our external service-providers are also bound.
volatility in raw material prices. We operate a strict
Major components of this code include measures for
policy of independence from individual suppliers so as
avoiding risk, and descriptions of escalation processes
to better secure the constant availability of the goods
and best-practice technologies. Correct implementa-
and services that we require. The basis for our successful
tion is continuously monitored by our globally active
risk management approach in this domain is a compre-
Internal Audit function. In addition, our safeguards are
hensive procurement information system that ensures
examined for their efficacy and efficiency by indepen-
permanent transparency of our purchasing volumes.
dent, external specialists.
Production risks: Risks in the field of production
Personnel risks: The future economic development
arise in the Henkel case primarily from the possibil-
of Henkel is essentially dependent upon the commit-
ity of operational interruptions at single-source sites,
ment and capabilities of our employees. We respond
although the number of such incidences has fallen
to the increasing competition for well-qualified tech-
sharply compared to the previous year. The negative
nical and managerial staff by maintaining close con-
effects of possible production failures can be offset
tacts with selected universities and conducting special
through flexible production control and appropriate
recruitment campaigns. Attractive qualification and
66
Annual Report 2007
further training opportunities combined with perfor-
from fixed to floating using interest rate swaps; in the
mance-related compensation plans form the basis of
case of the 2003 bond, the swap was 100 percent, and
our personnel development system.
in the case of the 2005 bond, there was a 50 percent
Financial risks: Under the financial risk category,
swap. As the bonds and interest rate swaps are in a
the main risks of relevance to Henkel are currency
formally documented hedge accounting relationship,
and interest rate risks, risks arising from our pension
the measurement of the bonds and the measurement
obligations and risks of bad debts.
of the interest rate swaps match in practical terms.
Given the global alignment of our businesses, we are
Henkel is also extensively protected against short-term
exposed to two types of currency risk. Transaction risks
increases in interest rates by additional interest rate
arise from exchange rate fluctuations causing changes
caps and forward rate agreements.
in the value of future foreign currency cash flows with
Our liquidity risk can be regarded as extremely low
respect to individual company financial statements.
due to the fact that we are able to call upon long-term
Transaction risks arising from our operating business
financing instruments and additional liquidity reserves
are avoided in part by the fact that we manufacture our
in the form of various credit lines.
products in those countries where they are also sold.
The basis of our currency, interest rate and liquid-
Residual transaction risks on the operating side are
ity risk control capability is provided by the treasury
proactively managed by Corporate Treasury. Its remit
guidelines introduced by the Management Board,
includes the ongoing assessment of specific currency
which are binding on the entire corporation. Defined
risk and the development of appropriate hedging strate-
in these are the targets, principles, competences and
gies. Because we strictly limit our potential losses, any
jurisdictions of Corporate Treasury. They describe the
negative impact on profits is restricted. The transaction
fields of responsibility and establish the distribution
risks arising from financial receivables and financial
of these responsibilities between the corporate level
liabilities are hedged in full. Translation risks, on the
and our subsidiaries. The trading, treasury control and
other hand, emanate from changes to items on the bal-
settlement (front, middle and back office) functions are
ance sheet and income statement of a subsidiary caused
physically and organizationally separated. Our clear
by foreign exchange fluctuations and the effect these
regulations on handling financial risks constitute an
have on the conversion of individual company financial
important component of Henkel’s financial strategy, by
statements into Group currency. The risks arising from
which all financial risks, including that of the liquidity
the translation of sales and profits of subsidiaries in
of our subsidiaries, are centrally managed. We deploy
foreign currencies and from net investments in foreign
derivative financial instruments exclusively for hedg-
entities are only hedged in exceptional cases.
ing purposes. Additional information on derivatives
The interest rate risk encompasses those potentially
and other financial instruments, and also the systems
positive or negative influences on profits, sharehold-
applied in the control of risk, can be found in Note 42
ers’ equity or cash flow in current or future reporting
to the Consolidated Financial Statements.
periods arising from changes in interest rates. The de-
Risks arising from pension obligations relate to
ployment of interest-bearing financial instruments
changes in interest rates, inflation rates, trends in
with the objective of optimizing the net interest result
wages and salaries, and changes in the statistical life
for the Henkel Group constitutes an essential compo-
expectancy of pension beneficiaries. Such risks are
nent of our financial policy. The maturity structure is
controlled as far as possible by structuring pension
controlled both by choosing appropriate fixed-interest
fund assets to match our pension obligations. Major
periods for the underlying financial assets and finan-
pension funds are administered by external fund man-
cial liabilities affecting liquidity, and by using inter-
agers in Germany, the USA, the UK, Ireland and the
est rate derivatives. The interest rates on the bond for
Netherlands. The funds covering our pension obliga-
1.0 billion euros issued by Henkel KGaA in May 2003
tions have been invested on the basis of asset-liability
and on the hybrid bond for 1.3 billion euros issued by
studies. The investments in Germany are structured
Henkel KGaA in November 2005 were both converted
such that the risks arising from interest rate changes
Annual Report 2007
67
affecting the level of pension liabilities are reduced by
are currently underway in many countries and geo-
the expected return on the interest-bearing assets. In
graphical jurisdictions.
the event of adverse movements in the stock markets,
Legal risks: As a globally active corporation, we are
the investments made in shares and fund units nega-
also exposed in the course of our ordinary business ac-
tively affect the performance of the pension assets. This
tivities to a range of risks relating to litigations in which
risk is countered by ensuring the wide diversification
we are currently involved or may become involved in
of our investment portfolio.
the future. These include, in particular, risks arising
We counter the perennial bad debt or credit risk
from the fields of product liability, product defects,
within the framework of our global credit policy
laws relating to competition and monopolies, the in-
through standardized procedures, a pro-active credit
fringement of proprietary rights, and environmental
management regime and the use of guarantees and
protection.
payment default insurance policies. Aside from meticu-
We counteract legal risks by issuing correspond-
lous local vigilance, we also monitor our key customer
ing binding guidelines and codes of conduct and by
relationships at the global level.
instituting appropriate training measures. We address
Research and technology risks: We regard the possi-
current actions and potential litigation risk by main-
bility of failing to identify technological advancements
taining constant contacts between the corporate legal
and potential innovations as a concomitant risk in the
department and local attorneys, and also through our
field of research and development. Our fundamental re-
separate reporting system. For certain legal risks, we
search activities and extensive exchange of information
have taken out insurance policies that are standard
with universities and external research institutes serve
for the industry and that we consider to be adequate.
to minimize this risk. Innovative products are a major
We form provisions for litigations to the extent that it
factor in the success of our company. By conducting
is likely in our estimation that obligations may arise
comprehensive market analyses and market research
which are either excluded from or not fully covered by
aligned to gaining insights into the needs and desires
our insurance policies and where a reasonably accurate
of our customers, by identifying future trends at an
estimate of the potential loss is possible. Nevertheless,
early stage and by implementing modern methods of
losses can arise from litigations that are not covered by
innovation management, we ensure that relevant risks
our insurance policies or our provisions.
are minimized and corresponding opportunities for a
There are currently no risks arising from litigations
successful product launch are maximized. As a further
either pending or threatened that could have a material
safeguard, we have also established a professional ideas
influence on our financial position.
and project management capability.
A constant potential risk for Henkel relates to the
Overall Risk
effect on our processes and product formulations that
At the time of writing this report, there are no identifi-
may arise from possible changes in law. In anticipation
able risks relating to further developments that could
of the advent of new European legislation concerning
endanger the existence either of the holding company
the registration, evaluation, authorization and restric-
or of the Group as a going concern. Our risk analysis
tion of chemical substances (REACH), our processes have
indicates that the net assets, financial position and
already been realigned to such future requirements,
results of operations of the holding company and of
not least in order to minimize the additional costs that
the Group as a whole are not currently endangered
will ensue once the pre-registration phase commences
either by individual risks or by the aggregated exposure
in 2008. The global introduction of new classification
arising from all risks combined. The system of risk cat-
and identification rules governing chemical substances
egorization undertaken by Henkel indicates that the
and product formulations in the form of the Globally
most significant exposure relates to the procurement
Harmonized System (GHS) of the United Nations is a
market and financial management risks, to which we
further case in point. Again, we are making sure that
are responding with the countermeasures described.
we are ready for these changes, preparations for which
68
Annual Report 2007
Outlook for the Henkel Group
Construction in the USA is likely to remain weak. By
contrast, we expect our growth regions to continue to
Underlying Conditions
exhibit dynamic development in the building sector.
World Economy
Opportunities and Risks
We anticipate that world economic growth will ease
Despite the expected slow-down, opportunities are likely
in comparison to 2007.
to arise from the still generally favorable conditions
In particular, we expect the USA to exhibit a rather
characterizing the world economy overall and the
low growth rate, and that economic expansion in Eu-
sectors we serve. Opportunities are also expected to
rope will likewise slow. Growth in Western Europe as a
emanate from our ever stronger commitment to in-
whole, including Germany, is likely to be moderate.
novation and our already established presence in the
Eastern Europe, Africa/Middle East, Asia (excl. Japan)
and Latin America is expected to continue.
dynamically developing growth markets.
We see risks arising from a recession in the USA and
contagion in other regions of the world, in the possibil-
We anticipate a further increase in raw material
ity of further raw material price increases, in further
prices, to which we will respond selectively with price
consolidation at the customer level and in the possibil-
increases of our own. We expect the euro/US dollar
ity of increasing competition, to which we would need
exchange rate to be volatile, with the US dollar ending
to respond with increased market investments.
the year somewhat stronger. While we anticipate a fall
Further specific opportunities and risks are dis-
in interest rates in the USA, we expect those in Europe
cussed in the individual business sector reports start-
to remain steady with a slight downward tendency.
ing on page 52.
Sector Development
Sales and Profits Forecast for 2008
Private consumption in Western Europe is expected
to continue to increase slightly. However, consumers
We intend once again to grow stronger than our
in the USA are likely to be more reluctant to spend
markets.
than they were in 2007, due not least to the real estate
crisis.
We expect overall automotive output to undergo a
Henkel expects to achieve organic sales growth (i.e.
after adjusting for foreign exchange and acquisitions/
divestments) of 3 to 4 percent in 2008.
moderate degree of expansion. While production in the
We expect an increase in operating profit (EBIT) –
USA is once again likely to decline, this will be more
adjusted for foreign exchange – in excess of organic
than offset by increasing production figures, particu-
sales growth.
larly in the growth regions. We regard the outlook for
the electronics industry as more encouraging.
We likewise expect an increase in earnings per preferred share (EPS) in excess of organic sales growth.
Similarly, we expect that growth will continue in
Our sales and profits forecast does not take into
the machine construction and metalworking indus-
account the effects of a major shift in prevailing eco-
tries. Our assumption for the packaging sector is that
nomic conditions or the planned acquisition of the
it will undergo growth similar to that of the industry
Adhesives and Electronic Materials businesses of
as a whole.
National Starch.
Annual Report 2007
69
The dynamism exhibited by our growth regions of
Long-term Sales and Profits Forecast
Subsequent Events
We further expect to generate a rate of organic sales
In keeping with our strategy to focus on our core busi-
growth in excess of the market average in the coming
nesses, on January 11, 2008, we sold our industrial wa-
years, with operating profit (EBIT) and earnings per
ter treatment business to BK Giulini, Ludwigshafen,
preferred share (EPS) rising faster than sales.
Germany, a subsidiary of Israel Chemicals Ltd. (ICL).
This operation, a marginal activity assigned to the Adhesives Technologies business sector, generated sales
of 52 million euros in fiscal 2006.
In mid January 2008, we informed our employees
in Avon, Ohio, USA, that we had reached an agreement
with Innovative Brands, a subsidiary of Najafi Companies, on the sale of the brands Duck, Painter’s Mate
Green and Easy Liner from our Consumer Adhesives business in North America. The closing of the transaction
is pending, subject to antitrust approval.
70
Annual Report 2007
Consolidated Financial Statements Subindex
Subindex
Consolidated Financial Statements
72 Consolidated Statement of Income
75
Notes to the Consolidated Financial Statements
75 Statement of Changes in Equity
73 Consolidated Balance Sheet
76 Group Segment Report
74 Consolidated Cash Flow Statement
78 Changes in Intangible Assets, Property,
75 Statement of Recognized Income and Expense
Plant and Equipment and Financial Assets
81 Notes to the Consolidated Statement of Income
87 Notes to the Consolidated Balance Sheet
111 Supplementary Information on the Consolidated
Statement of Income/Consolidated Balance Sheet
121 Recommendation for the Approval of the Annual
Financial Statements and the Appropriation of the Profit
of Henkel KGaA
122 Annual Financial Statements of Henkel KGaA
(summarized)
123 Statement by the Management Board
124 Auditors’ Report
125 Corporate Management of Henkel KGaA
Consolidated
Financial Statements
72
Annual Report 2007
71
Consolidated Statement of Income
Note
2006
%
2007
%
Change
Sales
1
12,740
100.0
13,074
100.0
2.6 %
Cost of sales
2
–6,963
–54.7
–7,013
–53.6
0.7 %
5,777
45.3
6,061
46.4
4.9 %
in million euros
Gross profit
Marketing, selling and distribution expenses
3
–3,650
–28.5
–3,748
–28.6
2.7 %
Research and development expenses
4
–340
–2.7
–350
–2.7
2.9 %
Administrative expenses
5
–697
–5.5
–664
–5.1
–4.7 %
Other operating income1)
6
266
2.1
109
0.8
–59.0 %
Other operating charges1)
7
–58
–0.5
–64
–0.5
10.3 %
1,298
10.2
1,344
10.3
3.5 %
Share of net profits of associates
83
0.6
88
0.7
6.0 %
Net result from other investments
–29
–0.2
–4
–0.1
–86.2 %
Investment result
54
0.4
84
0.6
55.6 %
Interest income
71
0.5
91
0.7
28.2 %
Interest expense
–247
–1.9
–269
–2.1
8.9 %
Net interest
–176
–1.4
–178
–1.4
1.1 %
–23.0 %
Financial result
8
Earnings before tax
Taxes on income
9
Net earnings
Minority interests
10
Earnings after minority interests
1)
–122
–1.0
–94
–0.7
1,176
9.2
1,250
9.6
6.3 %
–305
–2.4
–309
–2.4
1.3 %
871
6.8
941
7.2
8.0 %
–16
–0.1
–20
–0.2
25.0 %
855
6.7
921
7.0
7.7 %
prior-year figure adjusted
EARNINGS PER SHARE (BASIC)2)
Note
2006
2007
Change
Ordinary shares
48
1.97
2.12
7.6 %
Non-voting preferred shares
48
1.99
2.14
7.5 %
in euros
2)
EARNINGS PER SHARE (DILUTED)2)
Note
2006
2007
Change
Ordinary shares
48
1.97
2.12
7.6 %
Non-voting preferred shares
48
1.98
2.13
7.6 %
in euros
2)
72
Annual Report 2007
Consolidated Balance Sheet
ASSETS
Note
2006
%
2007
%
Intangible assets
11
5,487
41.2
4,940
37.9
Property, plant and equipment
12
2,078
15.6
2,077
15.9
496
3.7
495
3.8
66
0.5
33
0.3
in million euros
Investments in associates
Other investments
Financial assets1)
13
562
4.2
528
4.1
Other financial assets2)
14
70
0.5
66
0.5
5
–
4
–
Income tax refund claims3)
Other non-current assets1)
15
99
0.7
67
0.5
Deferred taxes
16
363
2.7
249
1.9
60.8
Non-current assets
8,664
64.9
7,931
Inventories
17
1,325
9.9
1,283
9.8
Trade accounts receivable
18
1,868
14.0
1,694
13.0
Other financial assets2)
19
124
0.9
170
1.3
Other current assets1)
20
312
2.4
315
2.4
110
0.8
90
0.7
929
7.0
1,440
11.0
Income tax refund claims3)
21
Assets held for sale
22
Current assets
Total assets
14
0.1
125
1.0
4,682
35.1
5,117
39.2
13,346
100.0
13,048
100.0
Note
2006
%
2007
%
Subscribed capital
23
374
2.9
438
3.3
Capital reserve
24
652
4.9
652
5.0
Retained earnings
25
5,362
40.2
5,963
45.7
Gains and losses recognized in equity
26
in million euros
Equity excluding minority interests
Minority interests
27
Equity including minority interests
–901
–6.8
–1,410
–10.8
5,487
41.2
5,643
43.2
60
0.4
63
0.5
5,547
41.6
5,706
43.7
Pensions and similar obligations
28
788
5.9
657
5.0
Long-term income tax provisions3)
29
168
1.3
100
0.8
Other long-term provisions
29
126
0.9
119
0.9
Long-term borrowings
30
2,322
17.4
2,304
17.7
31
118
0.9
147
1.1
0.1
Non-current financial liabilities2)
1)
Other non-current liabilities
32
8
0.1
10
Deferred taxes
33
427
3.2
314
2.4
3,957
29.7
3,651
28.0
Non-current liabilities
Current income tax provisions3)
34
108
0.8
152
1.2
Other current provisions
34
884
6.6
763
5.9
Short-term borrowings
35
1,012
7.6
838
6.4
Trade accounts payable
36
1,494
11.2
1,477
11.3
Current financial liabilities2)
37
93
0.7
246
1.9
Other current liabilities1)
38
224
1.6
200
1.5
27
0.2
15
0.1
Income tax liabilities3)
Current liabilities
Total equity and liabilities
3,842
28.7
3,691
28.3
13,346
100.0
13,048
100.0
1)
prior-year figures restated due to application of IFRS 7
new heading due to application of IFRS 7
3)
separate disclosure of income tax items to improve clarity
2)
Annual Report 2007
73
Consolidated
SHAREHOLDERS’ EQUITY AND LIABILITIES
Consolidated Cash Flow Statement
SEE NOTE 49
in million euros
Income taxes paid
2006
2007
1,298
1,344
–259
–305
Amortization/depreciation/write-ups of non-current assets (excluding financial assets)
350
337
Net gains/losses on disposal of non-current assets (excluding financial assets)
–94
–5
Change in inventories
–147
–60
Change in trade accounts receivable
–142
81
Change in other receivables and miscellaneous assets
–44
–24
Change in trade accounts payable
201
56
Change in other liabilities and provisions
–32
–103
1,131
1,321
Cash flow from operating activities
Purchase of intangible assets
–47
–40
Purchase of property, plant and equipment
–431
–470
Purchase of financial assets/acquisitions
–400
–7
200
93
Proceeds on disposal of subsidiaries and business units
Proceeds on disposal of other non-current assets
132
63
Cash flow from investing activities/acquisitions
–546
–361
Henkel KGaA dividends
–190
–211
–12
–12
Interest received
70
87
Dividends received
25
29
Subsidiary company dividends (to other shareholders)
Interest paid
–294
–314
Dividends and interest paid and received
–401
–421
Change in borrowings
–194
13
Allocation to Contractual Trust Arrangement (CTA)
–188
–
25
13
Cash flow from financing activities
–758
–395
Change in cash and cash equivalents due to movement in funds
–173
565
Change in cash and cash equivalents due to exchange rate movements
–110
–54
Change in liquid funds and marketable securities
–283
511
Liquid funds and marketable securities at January 1
1,212
929
929
1,440
in million euros
2006
2007
Cash flow from operating activities
1,131
1,321
Other financing transactions
Liquid funds and marketable securities at December 31
COMPUTATION OF FREE CASH FLOW
Purchase of intangible assets
–47
–40
–431
–470
Proceeds on disposal of subsidiaries and business units
200
93
Proceeds on disposal of other non-current assets
132
63
–199
–198
786
769
Purchase of property, plant and equipment
Dividends received/Net interest
Free cash flow
74
Annual Report 2007
Consolidated Financial Statements/Notes to the Consolidated Financial Statements
Statement of Recognized Income and Expense
2007
in million euros
2006
Net earnings
871
941
–486
–425
Financial instruments
3
–92
Actuarial gains/losses
7
–7
–9
3
Foreign exchange effects
Other gains and losses recognized in equity
Gains and losses recognized directly in equity
Total earnings for the period
– Minority interests
– Shareholders of Henkel KGaA
–83
–52
–568
–573
303
368
44
15
259
353
Notes to the Consolidated Financial Statements:
Statement of Changes in Equity
SEE NOTES 23 TO 27
Ordinary Preferred
shares
shares
At January 1, 2006
Capital
reserve
Retained
earnings
Minority
interests
Total
–23
28
5,399
–202
Translation
Financial
differences instruments
222
152
652
4,764
–396
Distributions
–
–
–
–190
–
–
–12
Sale of treasury stock
–
–
–
47
–
–
–
47
Net earnings
–
–
–
855
–
–
16
871
–
–
–
–
–485
–
–1
–486
–
–
–
–
–
3
–
3
Actuarial gains and losses
–
–
–
7
–
–
–
7
Other gains and losses
recognized in equity
–
–
–
–121
–
–
29
–92
222
152
652
5,362
–881
–20
60
5,547
–
–
–
–211
–
–
–12
–223
At December 31, 2006/
January 1, 2007
Distributions
Sale of treasury stock
–
–
–
14
–
–
–
14
Net earnings
–
–
–
921
–
–
20
941
–
–
–
–
–417
–
–8
–425
–
–
–
–
–
–92
–
–92
38
26
–
–64
–
–
–
–
–
–
–
–7
–
–
–
–7
Increase in share capital
out of corporate funds
Actuarial gains and losses
Other gains and losses
At December 31, 2007
–
–
–
–52
–
–
3
–49
260
178
652
5,963
–1,298
–112
63
5,706
Annual Report 2007
75
Notes to the Consolidated
Gains and losses
in million euros
Group Segment Report
by Business Sector1)
SEE NOTE 47
in million euros
Laundry &
Home Care
Cosmetics/
Adhesives
Toiletries Technologies
Operating Corporate
business
sectors
total
Henkel
Sales 2007
4,148
2,972
5,711
12,831
243
Change from previous year
0.8 %
3.7 %
3.6 %
2.7 %
–
2.6 %
Proportion of Group sales
32 %
23 %
43 %
98 %
2%
100 %
Sales 2006
4,117
2,864
5,510
12,491
249
12,740
EBITDA 2007
569
422
772
1,763
–82
1,681
EBITDA 2006
579
412
726
1,717
–69
1,648
–1.9 %
2.4 %
6.4 %
2.6 %
–
1.9 %
Return on sales (EBITDA) 2007
13.7 %
14.2 %
13.5 %
13.7 %
–
12.8 %
14.1 %
14.4 %
13.2 %
13.8 %
–
12.9 %
337
Amortization/depreciation of trademark
rights, other rights and property,
plant and equipment 2007
13,074
110
50
151
311
26
of which impairment losses 2007
2
1
–
3
2
5
of which write-ups 2007
–
–
1
1
2
3
Amortization/depreciation of trademark rights,
other rights and property, plant and equipment 2006
130
53
147
330
20
350
of which impairment losses 2006
7
6
2
15
1
16
of which write-ups 2006
1
–
–
1
–
1
EBIT 2007
459
372
621
1,452
–108
1,344
EBIT 2006
449
359
579
1,387
–89
1,298
2.1 %
3.8 %
7.3 %
4.7 %
–
3.5 %
Return on sales (EBIT) 2007
11.1 %
12.5 %
10.9 %
11.3 %
–
10.3 %
10.9 %
12.5 %
10.5 %
11.1 %
–
10.2 %
Capital employed 2007
2,752
2,236
3,680
8,668
76
8,744
Capital employed 20062)
2,955
2,328
3,648
8,931
24
8,955
–6.9 %
–4.0 %
0.9 %
–2.9 %
–
–2.4 %
Return on capital employed (ROCE) 2007
16.7 %
16.7 %
16.9 %
16.8 %
–
15.4 %
15.2 %
15.4 %
15.9 %
15.5 %
–
14.5 %
540
2)
Capital expenditures (excl. financial assets) 2007
180
77
236
493
47
Capital expenditures (excl. financial assets) 2006
157
381
272
810
53
863
4,123
2,917
4,690
11,730
361
12,091
Operating assets 20073)
Operating liabilities 2007
1,234
873
1,362
3,469
285
3,754
Net operating assets employed 20073)
2,889
2,044
3,328
8,261
76
8,337
4,295
2,930
4,562
11,787
399
12,186
1,174
783
1,256
3,213
375
3,588
3,121
2,147
3,306
8,574
24
8,598
1)
2)
including goodwill at acquisition cost
3)
including goodwill at net book value
76
Annual Report 2007
Group Segment Report
by Region1)
SEE NOTE 47
in million euros
Europe/
Africa/
Middle
East
North
America
(USA,
Canada)
Latin
America
AsiaPacific
Regions Corporate
total
Henkel
Sales by location of company 2007
8,480
2,557
691
1,103
12,831
243
5.4 %
–6.8 %
4.3 %
6.0 %
2.7 %
–
13,074
2.6 %
65 %
20 %
5%
8%
98 %
2%
100 %
Sales by location of company 2006
8,045
2,742
663
1,041
12,491
249
12,740
13,074
Sales by location of customer 2007
8,397
2,543
709
1,182
12,831
243
5.2 %
–6.5 %
3.4 %
7.0 %
2.7 %
–
2.6 %
64 %
20 %
5%
9%
98 %
2%
100 %
Sales by location of customer 2006
7,979
2,721
686
1,105
12,491
249
12,740
EBITDA 2007
1,204
378
77
104
1,763
–82
1,681
EBITDA 2006
1,173
397
61
86
1,717
–69
1,648
2.7 %
–4.9 %
25.7 %
20.7 %
2.6 %
–
1.9 %
14.2 %
14.8 %
11.1 %
9.4 %
13.7 %
–
12.8 %
14.6 %
14.5 %
9.2 %
8.3 %
13.8 %
–
12.9 %
1,005
308
58
81
1,452
–108
1,344
EBIT 2007
EBIT 2006
957
321
43
66
1,387
–89
1,298
5.0 %
–3.8 %
35.5 %
22.2 %
4.7 %
–
3.5 %
11.9 %
12.1 %
8.4 %
7.3 %
11.3 %
–
10.3 %
11.9 %
11.7 %
6.4 %
6.4 %
11.1 %
–
10.2 %
30.4 %
7.3 %
13.7 %
11.4 %
16.8 %
–
15.4 %
29.3 %
7.0 %
9.5 %
10.2 %
15.5 %
–
14.5 %
Operating assets 2007
5,215
4,980
529
1,006
11,730
361
12,091
2,447
560
130
332
3,469
285
3,754
2,768
4,420
399
674
8,261
76
8,337
4,941
5,408
539
899
11,787
399
12,186
2,204
608
111
290
3,213
375
3,588
2,737
4,800
428
609
8,574
24
8,598
2)
2)
Net operating assets employed 2006
1)
2)
including goodwill at net book value
In the operating business sectors, affiliated companies located in Germany, including the parent company, achieved
sales in 2007 of 2,081 million euros (2006: 2,027 million euros) and reported intangible assets and property, plant and
equipment at December 31, 2007 of 990 million euros (2006: 971 million euros).
The affiliated companies domiciled in North America reported intangible assets, property, plant and equipment at
December 31, 2007 of 3,841 million euros (2006: 4,342 million euros).
Annual Report 2007
77
Changes in Intangible Assets, Property,
Plant and Equipment and Financial Assets
COST
Intangible assets
Property, plant
and equipment
Financial assets
Total
6,089
5,285
699
12,073
352
21
–18
355
Additions
47
431
93
571
Disposals1)
–18
–258
–179
–455
5
–5
–
–
–530
–147
–13
–690
in million euros
At January 1, 2006
Changes in the Group/Acquisitions
Reclassifications
Translation differences
Reclassifications due to application of IFRS 7
At December 31, 2006/January 1, 2007
–
–
–3
–3
5,945
5,327
579
11,851
–109
–2
–76
–31
Additions
40
470
67
577
Disposals1)
–86
–242
–61
–389
Reclassifications
16
–16
–
–
–489
–126
–8
–623
5,424
5,337
546
11,307
–65
–
–44
–10
–
–
–109
–10
Intangible assets
Property, plant
and equipment
Financial assets
Total
429
3,240
18
3,687
–1
3
–2
–
–
–1
–1
–2
53
282
–
335
3
13
4
20
–16
–220
–2
–238
–
–
–
–
–10
–68
–
–78
1)
of which assets held for sale 2007
1)
ACCUMULATED AMORTIZATION/DEPRECIATION
in million euros
At January 1, 2006
Write-ups
Scheduled amortization/depreciation
Impairment losses
Disposals1)
Reclassifications
Reclassifications due to application of IFRS 7
Write-ups
Scheduled amortization/depreciation
Impairment losses
Disposals1)
Reclassifications
–
–
–
–
458
3,249
17
3,724
–5
–51
–
–56
–
–3
–
–3
56
279
–
335
1
4
4
9
–19
–164
–3
–186
1
–1
–
–
–8
–53
–
–61
484
3,260
18
3,762
–
–
–17
–5
–
–
–17
–5
Intangible assets
Property, plant
and equipment
Financial assets
Total
4,940
5,487
2,077
2,078
528
562
7,545
8,127
1)
1)
NET BOOK VALUE
in million euros
The impairment losses are allocated to the relevant functions.
78
Annual Report 2007
General information
The consolidated financial statements of Henkel KGaA have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union.
The individual financial statements of the companies included in the consolidation are drawn up on the same
accounting date as those of Henkel KGaA.
Members of the KPMG organization or other independent firms of auditors instructed accordingly have either audited the financial statements of companies included in the consolidation or, in exceptional cases, conducted a review
of those financial statements. On January 31, 2008, the personally liable managing partner of Henkel KGaA approved
the release of the consolidated financial statements to the Supervisory Board. The Supervisory Board is responsible for
reviewing the consolidated financial statements and declaring whether it approves them.
The consolidated financial statements are based on the principle of historical cost with the exception that certain
financial instruments are accounted for at their fair values. The Group currency is the euro. Unless otherwise indicated,
all amounts are shown in million euros. In order to improve the clarity and informative value of the consolidated
financial statements, certain items are combined in the balance sheet and in the statement of income and shown
separately in the Notes. A number of changes have been made to the structure of the consolidated statement of income,
consolidated balance sheet and Notes to the consolidated financial statements as a result of the application of IFRS 7
“Financial Instruments: Disclosures”, which was mandatory from January 1, 2007. We have applied IFRS 8 “Operating
Segments” before its effective date. We have also applied the revised IAS 1 “Presentation of Financial Statements” to the
information disclosed about capital.
Scope of consolidation
In addition to Henkel KGaA, the consolidated financial statements at December 31, 2007 include 10 German and 195
non-German companies in which Henkel KGaA has the power to govern the financial and operating policies, based on
the concept of control. This is generally the case where Henkel KGaA holds, directly or indirectly, a majority of the voting rights. Companies in which not more than half of the shares are held are fully consolidated if Henkel KGaA has the
power, directly or indirectly, to govern their financial and operating policies.
The composition of the Group has changed in the course of 2007 compared to the previous year. Nine companies
have been included in the consolidated Group figures for the first time, five companies were merged and six companies
are no longer consolidated. The financial investment in Ecolab Inc., St. Paul, Minnesota, USA is accounted for using the
at-equity method, because the Henkel Group holds more than 20 percent of the voting rights and has significant influence on the financial and operating policies of the company.
MAJOR DIVESTMENTS
in million euros
2007
Sale proceeds
93
Results of the divested companies/businesses
Sales
46
–6
–77
The companies no longer included in the consolidation include Chemolux S.à.r.l., Morris Profumi S.p.A. and Henkel
Chemicals (Mauritius) Ltd. On April 13, 2007, we sold our Chemtek business in the UK under an asset deal.
Consolidation methods
The purchase method is used for the consolidation of capital. This method stipulates that, for business combinations,
all hidden reserves and hidden charges in the company acquired are fully reflected at fair value and all identifiable intangible assets are separately disclosed. Any difference arising between the fair value of the net assets and the purchase
price is recognized as goodwill. Companies acquired are included in the consolidation for the first time by offsetting
Annual Report 2007
79
Net assets
the carrying amount of the parent company’s investment in the subsidiary companies against their assets and liabilities.
In subsequent years, the carrying amount of the parent company’s investment in the subsidiary companies is eliminated
against the current equity of the subsidiary companies.
All receivables and liabilities, sales, income and expenses, as well as intercompany profits on non-current assets or
inventories supplied by other companies in the Group, are eliminated on consolidation. Intra-Group supplies are effected
on the basis of market or transfer prices.
Currency translation
The financial statements of the consolidated companies included in the consolidation, including the hidden reserves
and hidden charges of Group companies recognized under the purchase method, and also goodwill arising on consolidation, are translated into euros using the functional currency method outlined in IAS 21. The functional currency is the
main currency in which the foreign company generates funds and makes payments. As the functional currency for all
the companies included in the consolidation is the local currency of the company concerned, assets and liabilities are
translated at closing rates, while income and expenses are translated at the average rates for the year, based on an approximation of the actual rates at the date of transaction. The differences arising from using average rather than closing
rates are taken to equity and shown as “Gains and losses recognized in equity”, without affecting earnings.
Foreign currency accounts receivable and payable are translated at closing rates. For the main currencies in the
Group, the following exchange rates have been used based on one euro:
CURRENCY
Average exchange rate
Closing exchange rate
ISO Code
2006
2007
2006
2007
British pounds
GBP
0.68
0.68
0.6715
0.7334
Swiss francs
CHF
1.57
1.64
1.6069
1.6547
Japanese yen
JPY
146.04
161.20
156.9300
164.9300
US dollars
USD
1.25
1.37
1.3170
1.4721
Accounting estimates and assumptions
Preparation of the consolidated financial statements is based on a number of accounting estimates and assumptions.
These have an impact on the reported amounts of assets, liabilities and contingent liabilities at the balance sheet date and
the disclosure of income and expenses for the reporting period. The actual amounts may differ from these estimates.
The accounting estimates and their underlying assumptions are continually reviewed. The effect of a change in an
accounting estimate is included in the period of the change if the change affects the period only, or in the period of
the change and future periods if the change affects both. The judgments of the Management Board regarding the application of those IFRSs which have a significant impact on the consolidated financial statements are presented in the
explanatory notes on taxes on income (Note 9), intangible assets (Note 11), pensions and similar obligations (Note 28),
derivatives and other financial instruments (Note 42) and share-based payment plans (Note 44).
Accounting standards not applied prior to their effective date
The following interpretations and revisions to existing standards of possible relevance to Henkel have not yet been applied: the revised IAS 23 “Borrowing Costs”, IFRIC 11 “Group and Treasury Share Transactions”, IFRIC 12 “Service Concession Arrangements”, IFRIC 13 “Customer Loyalty Programs”, IFRIC 14 “The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction”. These interpretations and standards will be applied by Henkel from fiscal
2008 or later. We expect the future application of IFRICs 11 to 14 and the revised IAS 23 not to have a significant impact
on the presentation in the financial statements.
80
Annual Report 2007
Notes to the Consolidated Statement of Income
(1) Sales
Sales comprise sales of goods and services less sales deductions. Sales are recognized once the goods have been delivered
or the service has been performed. In the case of goods, this coincides with the physical delivery and transfer of risk. It
must also be probable that the economic benefits associated with the transaction will flow to the company and the costs
incurred in respect of the transaction must be reliably measurable. Services are generally provided in conjunction with
the sale of goods and recorded once the service has been performed. No sale is recognized if there are significant risks
relating to the receipt of the consideration or it is likely that the goods will be returned. Interest income is recognized
on a time proportion basis that takes into account the effective yield on the asset and the interest rate in force. Dividend
income from investments is recognized when the shareholder’s right to receive payment is established.
An analysis of sales by business sector and geographical region is shown in the Group segment reports on pages
76 and 77.
(2) Cost of sales
Cost of sales comprises the cost of products and services sold and the purchase cost of merchandise sold. It consists of the
directly attributable cost of materials and primary production cost, as well as indirect production overheads including
the appropriate amount of wear and tear on non-current assets.
(3) Marketing, selling and distribution expenses
In addition to marketing organization and distribution costs, this item comprises mainly advertising, sales promotion
and market research costs. Also included here are the costs of technical advisory services for customers and amounts
written off accounts receivable of 15 million euros in 2007 (2006: 23 million euros).
(4) Research and development expenses
Research expenses may not be recognized as an asset. Development costs are recognized as an asset if all the criteria for
recognition are met, the research phase can be clearly distinguished from the development phase and the expenditure
can be attributed to distinct individual project phases. Currently, the criteria set out in IAS 38 for recognizing development costs are not all being met, due to a high level of interdependence within the development projects and the
uncertainty as to which products will eventually be marketable.
(5) Administrative expenses
Administrative expenses include personnel and non-personnel costs of Group management and costs relating to the
Human Resources, Purchasing, Accounts and IT departments.
Annual Report 2007
81
(6) Other operating income
OTHER OPERATING INCOME
2006
2007
Gains on disposal of non-current assets
44
14
Profits on sale of businesses
57
–
in million euros
Income from assignment of accounts receivable
43
–
Income from release of provisions
58
35
Income from release of valuation allowances for doubtful debts
4
6
Write-ups of non-current assets
1
3
Other operating revenue
Total
59
51
266
109
The income in 2006 from the assignment of accounts receivable related to the assignment by Henkel KGaA to Henkel
Trust e.V. of a non-current receivable arising from claims pertaining to a hereditary building lease.
Also in 2006, we achieved profits on the sale of the insulating glass sealant business and the rubber-to-metal bonding
chemicals business of 41 million euros and on the sale of the Dial foods business of 16 million euros. Other operating
revenue includes income not related to the period under review, insurance compensation amounting to 5 million euros
(2006: 3 million euros) and refunds of 2 million euros (2006: 2 million euros). The foreign exchange gains on operating
activities of 32 million euros disclosed here in 2006 and the corresponding amount from 2007 of 33 million euros have
been offset against foreign exchange losses on operating activities.
(7) Other operating charges
OTHER OPERATING CHARGES
2006
2007
Write-downs on miscellaneous assets
2
5
Foreign exchange losses on operating activities1)
3
6
in million euros
Losses on disposal of non-current assets
7
9
Other operating expenses
46
44
Total
58
64
1)
includes net loss on translation of operating receivables and liabilities in foreign currency of 7 million euros (2006: net loss of 1 million euros), and the net gain on
remeasurement to fair value of operating derivative hedging instruments of 1 million euros (2006: net loss of 2 million euros)
(8) Financial result
FINANCIAL RESULT
in million euros
Net result from other investments
2006
2007
83
88
–29
–4
Net interest
–176
–178
Total
–122
–94
82
Annual Report 2007
NET RESULT FROM OTHER INVESTMENTS
2006
2007
Income from other investments
2
–
Gains on disposal of financial assets
3
–
in million euros
Write-downs on shares in affiliated companies and investments at amortized cost
–4
–3
Losses arising from valuation of financial assets at fair value
–30
–1
Total
–29
–4
2006
2007
Interest and similar income from third parties
56
66
Other financial income
15
16
–
9
NET INTEREST
in million euros
Expected return on plan assets less interest expense for pension provisions1)
Total interest income
71
91
–213
–230
Other financial charges
–24
–39
Interest expense for pension provisions less expected return on plan assets1)
–10
–
Total interest expense
–247
–269
Total
–176
–178
Interest charges payable to third parties
1)
interest expense of 151 million euros and expected interest income of 160 million euros (2006: interest expense of 154 million euros and expected interest income
of 144 million euros)
The net interest figure includes the net loss on the valuation at fair value of marketable securities of 9 million euros
(2006: net loss of 4 million euros), the net loss on translation of non-operating receivables and liabilities in foreign currency of 149 million euros (2006: net loss of 159 million euros) and the net gain on the remeasurement to fair value of
non-operating derivative hedging instruments of 157 million euros (2006: net gain of 156 million euros).
(9) Taxes on income
EARNINGS BEFORE TAXES ON INCOME AND ANALYSIS OF TAXES
2006
2007
1,176
1,250
Current taxes
232
290
Deferred taxes
73
19
305
309
in million euros
Earnings before tax
Taxes on income
2006
2007
Current tax expense/income in the reporting year
262
300
Current tax adjustments for prior years
in million euros
–30
–10
Deferred tax expense/income from temporary differences
34
9
Deferred tax expense/income from changes in tax rates
–4
–13
Increase/decrease in valuation allowances on deferred tax assets
–7
–3
Annual Report 2007
83
MAIN COMPONENTS OF TAX EXPENSE AND INCOME
ALLOCATION OF DEFERRED TAXES
Deferred tax assets
in million euros
Deferred tax liabilities
Dec. 31, 2006
Dec. 31, 2007
Dec. 31, 2006
Dec. 31, 2007
71
40
456
401
Intangible assets
Property, plant and equipment
28
16
96
81
Financial assets
63
66
28
25
Inventories
30
25
11
7
Other receivables and miscellaneous assets
74
78
30
31
Special tax-allowable items
8
5
99
71
Provisions
432
306
83
45
Liabilities
64
132
13
37
1
1
–
–
Tax credits
Unused tax losses
Amounts netted
36
16
–
–
807
685
816
698
–389
–384
–389
–384
Valuation allowances
–55
–52
–
–
Balance sheet figures
363
249
427
314
Of the deferred tax accounted for in 2007, 19 million euros (2006: 73 million euros) was recognized in the statement of
income and 26 million euros (2006: 5 million euros) was recognized directly in equity.
Deferred tax assets and liabilities are accounted for with respect to temporary differences between the balance sheet
valuation of an asset or liability and its tax base, and with respect to unused tax losses and consolidation procedures
affecting earnings. Amounts netted represent tax assets and liabilities relating to the same tax authority.
The deferred tax balances recognized by German and foreign companies with respect to temporary differences on
provisions relate mainly to pensions and similar obligations.
German companies have recognized deferred tax balances in respect of special tax-allowable items relating to property, plant and equipment and to reinvestment reserves.
Whether deferred tax assets can be recognized depends on the probability that the deferred tax assets can actually
be realized in the future. The level of probability must be more than 50 percent. From 2004, German unused tax losses
can be fully offset up to a maximum amount of 1 million euros, and thereafter up to a limit of 60 percent (minimum
taxation). Included under the heading “Unused tax losses” are deferred tax assets of 6 million euros in respect of unused
tax losses in Germany, which are expected to be utilized by the end of 2008.
The valuation allowances on deferred tax assets of 52 million euros (2006: 55 million euros) are in respect of temporary
differences between the balance sheet valuation of an asset or liability and its tax base and are based on a reassessment
of the likelihood that they will be utilized in the future.
Deferred taxes have not been recognized with respect to unused tax losses of 412 million euros (2006: 355 million
euros), as it is not sufficiently probable that taxable profit will be available against which they may be utilized. Deferred
taxes of 1 million euros have been recognized with respect to tax credits.
84
Annual Report 2007
EXPIRY DATES OF UNUSED TAX LOSSES AND TAX CREDITS
Unused tax losses
Tax credits
Dec. 31, 2006
Dec. 31, 2007
Dec. 31, 2006
Dec. 31, 2007
1 year
27
42
–
–
2 years
20
16
–
–
22
56
–
2
233
225
–
–
Must be utilized within
3 years
more than 3 years
May be carried forward without restriction
172
177
3
–
Total
474
516
3
2
This table includes unused tax losses arising from the disposal of assets of 11 million euros (2006: 26 million euros)
which may be carried forward without restriction. In many countries, different tax rates apply to losses on the disposal
of assets and to operating profits, and in some cases losses on the disposal of assets may only be offset against profits
on the disposal of assets.
Deferred tax liabilities have not been recognized on the retained profits of foreign subsidiaries. The retained profits
are available to the subsidiaries for further investment.
The individual company reconciliations – prepared on the basis of the tax rates applicable in each country and taking
into account consolidation procedures – have been summarized in the reconciliation below. The estimated tax charge,
based on the tax rate applicable to Henkel KGaA of 40 percent, is reconciled to the tax charge disclosed.
CALCULATION OF THE TAX CHARGE DISCLOSED
in million euros
2006
2007
Earnings before taxes on income
1,176
1,250
40.0 %
40.0 %
470
500
–139
–153
–30
–46
–
–13
Tax rate (including trade tax) on income of Henkel KGaA
Estimated tax charge
Tax reductions due to differences between
local tax rates and the hypothetical tax rate
Tax reductions for prior years
Tax increases/reductions due to changes in tax rates
Tax increases due to losses in respect of which deferred taxes have not been recognized
22
32
Effects of different tax rates on net result from investments
(at-equity investments)
–30
–34
Tax reductions due to tax-free income and other items
–47
–25
59
48
Tax increases due to non-deductible expenses
and other items
Non-deductible expenses
38
32
Trade tax additions
17
12
4
4
Non-deductible withholding tax
Tax charge disclosed
Effective tax rate
305
309
25.94 %
24.72 %
German corporation tax legislation stipulated until and including 2007 a statutory tax rate of 25.0 percent plus the
solidarity surcharge of 5.5 percent. After taking trade tax into account, this gives an expected tax rate in both 2006 and
2007 of 40.0 percent.
Annual Report 2007
85
comprising
The provisions of the 2008 German Business Tax Reform Law include a reduction in the corporation tax rate from
25 percent to 15 percent with effect from the 2008 fiscal year, while at the same time there will be a slight rise in the
effective trade tax rate. In addition, a broadening of the basis of assessment for both corporation tax and trade tax will
lead to an increase in the income tax burden. In accordance with IAS 12.47, deferred tax which had arisen in Germany
was remeasured at December 31, 2007, with gains or losses on remeasurement being taken directly to equity if they
related to deferred tax originally accounted for in equity. Any other gains or losses on remeasurement were credited
or debited to the statement of income. Deferred tax income of 15 million euros has been recognized in respect of the
German companies as a whole. If there had been no reduction in tax rates, the effective tax rate would have been
25.92 percent.
The deferred tax assets recognized in equity decreased by 26 million euros (2006: decrease of 5 million euros). The
deferred tax assets relate to actuarial gains and losses on pension obligations and derivative financial instruments.
(10) Minority interests
The amount shown here represents the share of profits and losses attributable to other shareholders.
Their share of profits amounted to 29 million euros (2006: 26 million euros) and that of losses to 9 million euros
(2006: 10 million euros).
86
Annual Report 2007
Notes to the Consolidated Balance Sheet
The accounting policies for balance sheet items are described in the relevant Note.
EFFECT ON THE BALANCE SHEET OF ACQUISITIONS AND COMPANIES CONSOLIDATED FOR
THE FIRST TIME AT DATE OF ACQUISITION OR FIRST CONSOLIDATION
Total
in million euros
Intangible assets/Property, plant and equipment
Current assets
Provisions/Liabilities
30
10
–3
Non-current assets
All non-current assets with definite useful lives are amortized or depreciated using the straight-line method on the basis of
estimated useful lives standardized throughout the Group, with impairment losses being recognized when required.
The following standard useful lives continue to be used as the basis for calculating amortization and depreciation:
USEFUL LIFE
in years
Intangible assets with definite useful lives
Residential buildings
3 to 20
50
Office buildings
40
Research and factory buildings, workshops, stores and staff buildings
25 to 33
Production facilities
10 to 25
Machinery
7 to 10
Other equipment
10
Vehicles
Factory and research equipment
5 to 20
2 to 5
(11) Intangible assets
in million euros
At January 1, 2006
Trademark rights and other rights
Internally
Assets with
Assets with
generated
indefinite useful definite useful
lives
lives2) intangible assets
with definite
useful lives3)
Goodwill
Total
1,097
961
50
3,981
6,089
180
6
–
166
352
Additions
7
15
25
–
47
Disposals1)
–
–18
–
–
–18
Reclassifications
–
5
–
–
5
–114
–50
–1
–365
–530
5,945
1,170
919
74
3,782
–
–11
–
9
–2
Additions
–
12
28
–
40
Disposals1)
–
–22
–
–64
–86
Reclassifications
–
–5
21
–
16
–113
–41
–
–335
–489
1,057
852
123
3,392
5,424
–
–
–3
–
–
–
–62
–
–65
–
1)
1)
2)
3)
prior-year figures adjusted to reflect separate disclosure of internally generated intangible assets
separate disclosure of internally generated intangible assets to improve clarity
Annual Report 2007
87
COST
ACCUMULATED AMORTIZATION
in million euros
Internally
Assets with
Assets with
generated
lives
lives1) intangible assets
with definite
useful lives2)
Goodwill
Total
At January 1, 2006
4
422
3
–
429
–
–1
–
–
–1
Write-ups
–
–
–
–
–
Scheduled amortization
–
46
7
–
53
Impairment losses
–
3
–
–
3
Disposals
–
–16
–
–
–16
Reclassifications
–
–
–
–
–
–
–10
–
–
–10
4
444
10
–
458
–
–5
–
–
–5
Write-ups
–
–
–
–
–
Scheduled amortization
–
44
12
–
56
Impairment losses
–
1
–
–
1
Disposals
–
–19
–
–
–19
Reclassifications
–
–
1
–
1
–
–8
–
–
–8
4
457
23
–
484
Internally
Assets with
Assets with
generated
lives
lives intangible assets
with definite
useful lives1)
Goodwill
Total
1)
2)
prior-year figures adjusted to reflect separate disclosure of internally generated intangible assets
NET BOOK VALUE
in million euros
1,053
395
100
3,392
4,940
1,166
475
64
3,782
5,487
1)
Trademarks and other rights acquired for valuable consideration are stated initially at acquisition cost, while internally generated software is stated at production cost. Thereafter, goodwill and trademark rights and other rights with
indefinite useful lives are subject to an impairment test at least once a year (impairment-only approach). In the course
of our annual impairment test, we reviewed the carrying values of goodwill and trademark rights and other rights
with indefinite useful lives. The allocation of the trademark rights and other rights with indefinite useful lives, and
also goodwill, to the cash-generating units was adapted during the fiscal year to the new structures established at the
Adhesives Technologies business sector. The prior-year figures have been restated accordingly. The following table shows
the cash-generating units together with the associated goodwill and trademark rights and other rights with indefinite
useful lives at book value at the balance sheet date:
88
Annual Report 2007
BOOK VALUE
Cash-generating units
Dec. 31, 2007
Dec. 31, 2006
in million euros
Trademark rights
and other rights
with indefinite
useful lives
Goodwill
Trademark rights
and other rights
with indefinite
useful lives
Goodwill
335
710
321
631
Detergents
Household cleaners
254
822
227
719
Total Laundry & Home Care
589
1,532
548
1,350
Retail products
512
1,069
444
970
14
33
14
32
526
1,102
458
1,002
40
32
36
30
Hair salon products
Total Cosmetics/Toiletries
Building adhesives
Craftsmen and consumer adhesives
7
381
7
340
Industrial adhesives
4
735
4
670
51
1,148
47
1,040
Total Adhesives Technologies
The assessment for goodwill impairment according to the fair-value-less-cost-to-sell approach is based on future estimated
cash flows which are obtained from corporate budgets with a three-year financial forecasting horizon. For the period
after that, an average growth rate of 1 percent in the cash flows is assumed for the purpose of impairment testing. The US
dollar to euro exchange rate applied is 1.30. Taking into account specific tax effects, the cash flows in all cash-generating
units are discounted at different rates for the cost of capital in each business sector: 7.5 percent after tax for Laundry &
Home Care and Cosmetics/Toiletries and 8.5 percent after tax for Adhesives Technologies.
No goodwill impairment losses were recognized as a result of the impairment test.
In the Laundry & Home Care business sector, we have assumed an average increase in sales during the three-year forecasting horizon of 4 to 5 percent per annum with a slight increase in share of world market.
Sales growth in the Cosmetics/Toiletries business sector over the three-year forecasting horizon is budgeted at around
4 percent per annum. With the worldwide cosmetics market expected to grow at an annual rate of 2 to 3 percent, this
would mean an increase in market share.
In the Adhesives Technologies business sector, average sales growth over the three-year forecasting horizon is projected at
6 to 7 percent per annum, while market growth is expected to be around 3 percent per annum. We anticipate expanding
our market share still further, especially in the growth regions of Asia-Pacific and Eastern Europe.
In all the business sectors, we have assumed that future increases in the price of raw materials will be largely offset
by economies in purchasing. Together with further measures to improve efficiency and pro-active management of the
portfolio, this will result in an increase in gross margins in all the business sectors.
Isolated negative budget variances would not necessarily lead to impairment losses.
The trademark rights and other rights with an indefinite useful life are established in their markets and will continue to be promoted in the future.
In the impairment tests in 2007 for trademark rights and other rights with an indefinite useful life valued at
1,053 million euros, cash-generating units were identified and their recoverable amounts determined. No impairment
losses were recognized as a result of the impairment test.
Annual Report 2007
89
(12) Property, plant and equipment
COST
in million euros
Land, land rights
and buildings
Plant and
machinery
Factory and
office equipment
Payments on
account and
assets in course
of construction
Total
At Jan. 1, 2006
1,617
2,669
870
129
5,285
7
15
–1
–
21
Additions
68
123
83
157
431
Disposals1)
–48
–140
–64
–6
–258
Reclassifications
13
54
22
–94
–5
–45
–70
–26
–6
–147
1,612
2,651
884
180
5,327
–12
–54
–10
–
–76
Additions
62
144
83
181
470
Disposals1)
–67
–93
–73
–9
–242
At Dec. 31, 2006/Jan. 1, 2007
Reclassifications
At Dec. 31, 2007
71
64
21
–172
–16
–42
–59
–20
–5
–126
1,624
2,653
885
175
5,337
1)
–30
–8
–6
–
–44
1)
–7
–3
–
–
–10
in million euros
Land, land rights
and buildings
Plant and
machinery
Factory and
office equipment
Payments on
account and
assets in course
of construction
Total
At Jan. 1, 2006
3,240
ACCUMULATED DEPRECIATION
761
1,855
624
–
–
3
–
–
3
Write-ups
–
–1
–
–
–1
45
149
88
–
282
4
7
2
–
13
–36
–126
–58
–
–220
1
7
–8
–
–
–14
–27
–27
–
–68
At Dec. 31, 2006/Jan. 1, 2007
Scheduled depreciation
Impairment losses
1)
Disposals
Reclassifications
761
1,867
621
–
3,249
–6
–37
–8
–
–51
Write-ups
–2
–1
–
–
–3
Scheduled depreciation
46
147
86
–
279
2
1
1
–
4
–27
–73
–64
–
–164
Impairment losses
Disposals1)
Reclassifications
1
–2
–
–
–1
–13
–26
–14
–
–53
At Dec. 31, 2007
762
1,876
622
–
3,260
1)
–8
–5
–4
–
–17
1)
–3
–2
–
–
–5
90
Annual Report 2007
NET BOOK VALUE
Land, land rights
and buildings
Plant and
machinery
Factory and
office equipment
Payments on
account and
assets in course
of construction
Total
862
777
263
175
2,077
851
784
263
180
2,078
in million euros
Additions are stated at purchase or manufacturing cost. The latter includes direct costs and appropriate proportions of
overheads; interest charges on borrowings are not included. Cost figures are shown net of investment grants and allowances. There were liabilities secured by mortgages at December 31, 2007 of 35 million euros (2006: 24 million euros). The
periods over which the assets are depreciated are based on their estimated useful lives as set out on page 87. Scheduled
depreciation and impairment losses recognized are disclosed in the consolidated statement of income according to the
functions for which the assets are used.
(13) Financial assets
Shares in affiliated companies and other investments disclosed in financial assets are measured initially at cost and
subsequently at their fair values. Shares in affiliated companies and other investments for which the fair value cannot
be reliably determined are measured subsequently at amortized cost.
The shares in the associated company Ecolab Inc., St. Paul, Minnesota, USA are accounted for using the equity method
at the appropriate proportion of its net assets (see Notes 8 and 55, pages 82 f. and 120). The percentage holding is calculated on the basis of the shares outstanding. The updated net asset figure is translated at the mid rate of exchange on the
balance sheet date. The decrease in the carrying value of Ecolab Inc. is due to share repurchase schemes implemented
during 2007. This had a significant impact on the equity of Ecolab Inc. and therefore also on the equity valuation of
our investment.
in million euros
At Jan. 1, 2006
Affiliated
companies
Investments in
associates
Other
investments
Long-term
loans
Total
33
530
129
7
699
–18
–
–
–
–18
Additions
33
59
1
–
93
Disposals
–
–83
–92
–4
–179
Reclassifications
–
–
–
–
–
–3
–10
–
–
–13
Reclassifications due to application
of IFRS 7
At Dec. 31, 2006/Jan. 1, 2007
–
–
–
–3
–3
45
496
38
–
579
–31
–
–
–
–31
Additions
7
59
1
–
67
Disposals
–2
–52
–7
–
–61
Reclassifications
–
–
–
–
–
–
–8
–
–
–8
19
495
32
–
546
At Dec. 31, 2007
Annual Report 2007
91
COST
ACCUMULATED WRITE-DOWNS
in million euros
Affiliated
companies
Investments in
associates
Other
investments
Long-term
loans
Total
At Jan. 1, 2006
4
–
13
1
18
–2
–
–
–
–2
–
–
–
–1
–1
Write-downs
–
–
4
–
4
Disposals
–
–
–2
–
–2
Reclassifications
–
–
–
–
–
–
–
–
–
–
At Dec. 31, 2006/Jan. 1, 2007
2
–
15
–
17
–
–
–
–
–
Write-ups
–
–
–
–
–
Write-ups
Write-downs
–
–
4
–
4
Disposals
–
–
–3
–
–3
Reclassifications
–
–
–
–
–
–
–
–
–
–
At Dec. 31, 2007
2
–
16
–
18
Affiliated
companies
Investments in
associates
Other
investments
Long-term
loans
Total
At Dec. 31, 2007
17
495
16
–
528
At Dec. 31, 2006
43
496
23
–
562
Dec. 31, 2006
Dec. 31, 2007
3
1
Financial receivables from third parties
31
28
Miscellaneous financial assets
36
37
Total
70
66
NET BOOK VALUE
in million euros
(14) Other financial assets
OTHER FINANCIAL ASSETS
in million euros
Long-term loans1)
1)
new item due to the application of IFRS 7
Other financial assets are stated at face value or at their fair values. As soon as risks are identified, valuation allowances
are set up.
Miscellaneous financial assets include receivables from employees.
(15) Other non-current assets
Other non-current assets comprise payments on account and sundry prepaid expenses and deferred charges.
92
Annual Report 2007
(16) Deferred taxes
Deferred taxes result from the following factors:
» Timing differences between the balance sheet valuation of an asset or liability and its tax base
» Unused tax losses which are expected to be utilized
» Consolidation procedures at Group level
The allocation of deferred tax assets to the various balance sheet headings is shown in Note 9 (Taxes on income,
page 83 ff.).
(17) Inventories
Inventories are stated at purchase or manufacturing cost. Inventories are measured using the FIFO method or the
weighted average cost formula as appropriate.
Manufacturing cost includes – in addition to direct costs – appropriate proportions of necessary overheads (e.g. the
goods inward department, raw materials store, filling and other costs prior to the finished products store), as well as
production-related administrative expenses and pension costs for employees engaged in the production process, and
production-related depreciation charges. Interest charges incurred during the period of manufacture are, however, not
included.
Inventories are written down to their net realizable value if, on the basis of the lower of quoted or market prices, this
is lower than cost at the balance sheet date. The write-down, based on the gross value, was 69 million euros (2006:
54 million euros).
ANALYSIS OF INVENTORIES
in million euros
Dec. 31, 2006
Dec. 31, 2007
386
396
Raw materials and supplies
Work in process
Finished products and merchandise
Payments on account for merchandise
Total
67
64
859
818
13
5
1,325
1,283
(18) Trade accounts receivable
Trade accounts receivable are due within one year. Valuation allowances are recognized in respect of specific risks as
appropriate. Total valuation allowances of 15 million euros (2006: 23 million euros) have been recognized. Trade accounts
receivable include an amount of 8 million euros (2006: 8 million euros) relating to receivables which have been sold to
a factoring company but are still included as assets in the balance sheet because the risk of default has not been fully
transferred to the factor. The cash received is disclosed as a liability to the factoring company.
OTHER FINANCIAL ASSETS
in million euros
Dec. 31, 2006
Dec. 31, 2007
Amounts receivable from non-consolidated affiliated companies
1
7
Amounts receivable from companies in which an investment is held
5
9
Derivatives with positive fair values
41
59
Miscellaneous financial assets
77
95
124
170
Total
Other financial assets are stated at face value or at their fair values. Valuation allowances are recognized if any risks
associated with them are identified.
Annual Report 2007
93
(19) Other financial assets
Miscellaneous financial assets include the following:
» Financial receivables from third parties of 40 million euros (2006: 24 million euros)
» Amounts due from employees of 9 million euros (2006: 13 million euros)
» Amounts due from suppliers of 25 million euros (2006: 24 million euros)
» Insurance claims of 1 million euros (2006: 2 million euros)
(20) Other current assets
Other current assets comprise other tax receivables of 117 million euros (2006: 122 million euros), payments on account
of 26 million euros (2006: 20 million euros) and various prepaid expenses and deferred charges.
(21) Liquid funds and marketable securities
LIQUID FUNDS AND MARKETABLE SECURITIES
in million euros
Liquid funds
Dec. 31, 2006
Dec. 31, 2007
181
1,429
Marketable securities
748
11
Total
929
1,440
Marketable securities are accounted for at their fair values at the balance sheet date. Price movements with respect
to portfolios of marketable securities managed on a fair value basis are recognized in the statement of income under
financial result. Changes in the value of other marketable securities are recognized directly in equity (see Note 42). The
marketable securities managed on a portfolio basis in 2006 have been unwound in the current reporting year.
(22) Assets held for sale
The remeasurement of the assets held for sale at the lower of their carrying amount and fair value less costs to sell did
not lead to the recognition of any impairment losses. Assets held for sale include the water treatment business and
consumer adhesives business in North America, both from the Adhesives Technologies business sector.
(23) Subscribed capital
SUBSCRIBED CAPITAL
Dec. 31, 2006
Dec. 31, 2007
Ordinary bearer shares
222
260
Preferred bearer shares
152
178
Capital stock
374
438
in million euros
Comprising 259,795,875 ordinary shares and 178,162,875 non-voting preferred shares
The capital stock of the corporation has been increased by 64 million euros, from 374 million euros to 438 million
euros, out of the corporation’s own resources without issuing any new shares, following a 1:3 share split approved by
the Annual General Meeting on April 16, 2007, by transferring to subscribed capital a total of 64 million euros which
was disclosed in the balance sheet at December 31, 2006 in other revenue reserves.
At the Annual General Meeting of Henkel KGaA on April 10, 2006, the personally liable managing partners were
authorized – with the approval of the Shareholders’ Committee and of the Supervisory Board – to increase the capital of
the corporation in one or more installments at any time up to April 9, 2011, up to a total of 25.6 million euros by issuing
new non-voting preferred shares to be paid up in cash (authorized capital). The personally liable managing partners were
further authorized – with the approval of the Shareholders’ Committee and of the Supervisory Board – to exclude the
94
Annual Report 2007
statutory pre-emptive rights of existing shareholders. Pre-emptive rights may only be excluded, however, for fractional
entitlements or on condition that the issue price for the new shares is not significantly less than the quoted market
price of shares of the same category at the time the issue price is finally fixed.
At the Annual General Meeting of Henkel KGaA on April 10, 2006, the personally liable managing partners were
authorized to purchase ordinary or preferred shares in the corporation not exceeding 10 percent of the capital stock
at any time up to October 9, 2007. This authorization was renewed for the period until October 15, 2008 at the Annual
General Meeting of April 16, 2007, the authorization granted in the previous year being simultaneously withdrawn.
The personally liable managing partners were authorized – with the approval of the Shareholders’ Committee and of
the Supervisory Board – to dispose of treasury shares acquired, without first offering them to existing shareholders, by:
» offering and transferring them to members of the Management Board and certain executive management personnel
of Henkel KGaA and to members of the management boards and certain executive management personnel of certain
affiliated companies in Germany and abroad under the terms of the Stock Incentive Plan of the Henkel Group, or
» selling them to third parties or transferring them in other ways for the purpose of acquiring businesses, parts of
businesses or investments in businesses or forming business combinations, or
» selling them for cash in a way other than on the stock market or via an offer addressed to all the shareholders, provided
that the selling price of the shares is not significantly lower than the quoted market price at the time of the sale. In
this case, the number of shares sold, together with the new shares issued out of authorized capital, while excluding
the pre-emptive rights of existing shareholders, must not exceed 10 percent of the existing capital stock when the
shares are issued or sold.
Insofar as members of the Management Board of the corporation are among those eligible to participate in the Stock
Incentive Plan, the Shareholders’ Committee is authorized – with the approval of the Supervisory Board – to offer and
transfer the shares.
The personally liable managing partners were also authorized – with the approval of the Shareholders’ Committee and
of the Supervisory Board – to cancel treasury stock without any further resolution in General Meeting being required.
Treasury stock held by the corporation at December 31, 2007 amounted to 5,030,790 preferred shares. This represents 1.15 percent of the capital stock and a proportional nominal value of 5.0 million euros. 992,680 of these shares
were originally bought back in 2000, 808,120 in 2001 and 694,900 in 2002 (2,495,700 shares in total or 7,487,100 after
the 1:3 share split). Options were exercised for the first time under the Stock Incentive Plan in 2004. Since 2004, taking
the 1:3 share split into account, the exercise of options has led to a reduction of 2,456,310 in treasury stock held, with
a proportional nominal value of 2.5 million euros (0.56 percent of the capital stock). In 2007, the exercise of options
led to a reduction of 427,704 in treasury stock held. The proportional nominal value of the capital stock amounted to
0.4 million euros (0.10 percent). The selling prices were based on the stock market prices prevailing at the time of
disposal. The total gain on disposal was 14 million euros and this was recognized directly in equity.
(24) Capital reserve
The capital reserve comprises the amounts received in previous years in excess of the nominal value of preferred shares
and convertible warrant bonds issued by Henkel KGaA.
(25) Retained earnings
Included in retained earnings are the following:
» Amounts allocated in the financial statements of Henkel KGaA in previous years
» Amounts allocated from consolidated net earnings less minority interests
» Buy-back of treasury stock by Henkel KGaA at cost and the gain on their disposal
» The recognition in equity of actuarial gains and losses
Annual Report 2007
95
Retained earnings also include changes in the equity valuation of our investment in Ecolab Inc., St. Paul, Minnesota,
USA, reflected directly in equity. These result mainly from recognizing actuarial gains and losses in equity and from
share repurchase schemes at Ecolab Inc.
(26) Gains and losses recognized in equity
The items under this heading represent the differences on translation of the financial statements of foreign subsidiary
companies and the effects of the revaluation of derivative financial instruments and available-for-sale financial assets
recognized in equity. The derivative financial instruments are either used as cash flow hedges or hedges of a net investment in a foreign entity.
Mainly as a result of the decrease in the value of the US dollar against the euro, the negative translation difference
at December 31, 2007 was up by 425 million euros compared to December 31, 2006 (2006: negative translation difference increased by 486 million euros).
(27) Minority interests
The minority interests comprise the shares of third parties in the equity of a number of companies included in the
consolidation.
(28) Pensions and similar obligations
Employees in companies included in the consolidated financial statements have entitlements under company pension
plans which are either defined contribution or defined benefit plans. These take different forms depending on the legal,
financial and tax regime in each country. The level of benefits provided is based, as a rule, on the length of service and
earnings of the person entitled.
The defined contribution plans are structured in such a way that the corporation pays contributions to public or
private sector institutions on the basis of statutory or contractual terms or on a voluntary basis and has no further
obligations regarding the payment of benefits to the employee.
In defined benefit plans, the liability for pensions and other post-employment benefits is calculated at the present
value of the future obligations (projected unit credit method). This actuarial method of calculation takes future trends
in wages, salaries and retirement benefits into account.
Effective January 1, 2004, most of the defined benefit plans in Germany were harmonized with the structure of a
unit-based plan (“Pensions 2004”).
To provide protection under civil law of the pension entitlements of future and current pensioners against insolvency,
the proceeds of the bond issued in 2005 and certain other assets were allocated to Henkel Trust e.V. The trustee invests
the cash with which it has been entrusted in the capital market in accordance with investment policies laid down in
the trust agreement.
TRENDS IN WAGES, SALARIES AND RETIREMENT BENEFITS
Germany
in percent
Rest of world1)
USA
2006
2007
2006
2007
2006
2007
Discount factor
4.3
5.3
5.8
5.9
2.0 – 6.0
2.0 – 8.0
Income trend
3.0
3.25
4.0
4.3
1.7 – 4.0
1.7 – 8.0
Retirement benefit trend
1.5
2.0
–
4.3
0 – 3.0
0 – 4.5
Expected return on plan assets
6.3
5.0 – 6.2
7.0
7.0
1.7 – 7.0
2.0 – 7.0
–
–
5.0 – 10.0
9.5
5.0 – 10.0
2.0 – 9.5
Expected increases in costs for medical benefits
1)
for the eurozone, a discount factor of 5.3 percent was used (2006: 4.3 percent)
96
Annual Report 2007
The expected return on total plan assets was derived from the weighted expected long-term return on the various
categories of assets.
PRESENT VALUE OF PENSIONS AND SIMILAR OBLIGATIONS AT DECEMBER 31, 2006
in million euros
At January 1, 2006
Changes in the Group/Translation differences
Current service cost
Germany
USA
Rest of world
Total
2,006
814
534
3,354
–1
–85
–12
–98
9
5
7
21
86
20
27
133
Amortization of past service cost
–
–
6
6
Gains/losses arising from the termination and curtailment of plans
–
1
–1
–
Interest expense
Added
86
43
25
154
172
64
57
293
Employees’ contributions to pension funds
2
–
1
3
Retirement benefits paid out of plan assets
–13
–26
–14
–53
Employer’s payments for pensions and similar obligations
–103
–20
–14
–137
Utilized
–114
–46
–27
–187
Released
–
–30
–1
–31
2,072
722
558
3,352
Germany
USA
Rest of world
Total
1,457
502
335
2,294
–
–55
–10
–65
Employer’s contributions to pension funds
170
13
27
210
2
–
1
3
–13
–26
–14
–53
90
33
21
144
FAIR VALUE OF PLAN ASSETS AT DECEMBER 31, 2006
in million euros
At January 1, 2006
Actual return on plan assets
–16
30
17
31
1,690
497
377
2,564
74
63
38
175
Germany
USA
Rest of world
Total
549
312
200
1,061
in million euros
At January 1, 2006
–1
–30
–3
–34
25
–25
–10
–10
Added
Utilized
Released
82
31
36
149
–273
–33
–41
–347
–
–30
–1
–31
382
225
181
788
137
212
94
443
1,935
510
464
2,909
–1,690
–497
–377
–2,564
382
225
181
788
Analysis of provisions for pensions and similar obligations
Present value of unfunded obligations
Present value of funded obligations
Fair value of plan assets
Total
Annual Report 2007
97
PENSIONS AND SIMILAR OBLIGATIONS IN THE BALANCE SHEET AT DECEMBER 31, 2006
NET PENSION COST IN 2006
in million euros
Germany
USA
Rest of world
Total
86
20
27
133
–
–
6
6
–
1
–1
–
86
43
25
154
–90
–33
–21
–144
82
31
36
149
Germany
USA
Rest of world
Total
2,072
722
558
3,352
–
–78
–25
–103
–158
31
–54
–181
68
14
25
107
–
–1
1
–
–
–
–
–
Interest expense
Allocation to provision for pensions and similar obligations
PRESENT VALUE OF PENSIONS AND SIMILAR OBLIGATIONS AT DECEMBER 31, 2007
in million euros
At January 1, 2007
Interest expense
Added
85
40
26
151
153
53
52
258
3
–
1
4
–110
–23
–20
–153
Employer’s payments for pensions and similar obligations
Utilized
Released
–22
–20
–13
–55
–129
–43
–32
–204
–1
–
–3
–4
1,937
685
496
3,118
Germany
USA
Rest of world
Total
1,690
497
377
2,564
–
–54
–20
–74
FAIR VALUE OF PLAN ASSETS AT DECEMBER 31, 2007
in million euros
At January 1, 2007
Employer’s contributions to pension funds
60
–
25
85
3
–
1
4
–110
–23
–20
–153
104
32
24
160
–134
11
–2
–125
1,613
463
385
2,461
–30
43
22
35
Actual return on plan assets
98
Annual Report 2007
PENSIONS AND SIMILAR OBLIGATIONS IN THE BALANCE SHEET AT DECEMBER 31, 2007
in million euros
At January 1, 2007
Germany
USA
Rest of world
Total
382
225
181
788
–
–24
–5
–29
–24
20
–52
–56
Added
49
21
28
98
Utilized
–82
–20
–38
–140
–1
–
–3
–4
324
222
111
657
Released
Analysis of provisions for pensions and similar obligations
Present value of unfunded obligations
Present value of funded obligations
Total
122
215
75
412
1,815
470
421
2,706
–1,613
–463
–385
–2,461
324
222
111
657
Germany
USA
Rest of world
Total
68
14
25
107
–
–1
1
–
NET PENSION COST IN 2007
in million euros
Interest expense
Allocation to provisions for pensions and similar obligations
–
–
–
–
85
40
26
151
–104
–32
–24
–160
49
21
28
98
Actuarial gains and losses are recognized in the year in which they arise as part of the pension provision and included in
the statement of recognized income and expense in accordance with IAS 19.93B. As of December 31, 2007, accumulated
actuarial gains and losses of 555 million euros had been offset against retained earnings.
Of the amounts added to the provision in 2007, 107 million euros (2006: 139 million euros) is included in operating
profit (pension costs as part of payroll costs, page 111) and a gain of 9 million euros (2006: expense of 10 million euros)
in financial result (page 82). The expenses shown in operating profit and all the releases from provisions are allocated
by function, depending on the sphere of activity of the employee.
ANALYSIS OF PLAN ASSETS
Fair value
Shares/Investment fund units
Dec. 31, 2007
Dec. 31, 2006
in %
Fair value
in %
2,086
81.4
2,002
81.3
Bonds
295
11.5
266
10.8
Other assets
183
7.1
191
7.8
Cash
–
–
2
0.1
Total
2,564
100.0
2,461
100.0
At December 31, 2007, other assets include the present value of a non-current receivable of 43 million euros (2006:
43 million euros) relating to claims pertaining to a hereditary building lease assigned by Henkel KGaA to Henkel Trust
e.V. Also shown here is a claim of 113 million euros (2006: 116 million euros) against Cognis for indemnification of pension obligations.
Annual Report 2007
99
in million euros
ADDITIONAL INFORMATION
in million euros
2005
2007
2006
Present value of obligations
3,354
3,352
3,118
2,294
2,564
2,461
–1,060
–788
–657
–11
–1
–14
29
31
–125
Overfunding/underfunding of pension obligations
Effect of experience adjustments on pension obligations
Effect of experience adjustments on plan assets
(29) Long-term provisions
CHANGES IN 2006
in million euros
Released
Added
Balance
Dec. 31, 2006
138
–
129
168
45
3
9
116
Balance
Jan. 1, 2006
Other
changes
Utilized
Income tax provisions
187
–10
Sundry long-term provisions
199
–44
Advanced Restructuring
41
–31
–
–
–
10
427
–85
183
3
138
294
Balance
Jan. 1, 2007
Other
changes
Utilized
Released
Added
Balance
Dec. 31, 2007
168
–33
116
1
82
100
Sundry long-term provisions
116
3
21
–
21
119
10
–10
–
–
–
–
294
–40
137
1
103
219
Total
CHANGES IN 2007
in million euros
Total
The amounts recognized as long-term provisions are the best estimates of the expenditure required to settle the present obligations at the balance sheet date. Provisions which include significant interest elements are discounted to the
balance sheet date.
Other changes include changes in the Group/acquisitions, movements in exchange rates and adjustments to reflect
changes in maturity as time passes.
The income tax provisions comprise accrued tax liabilities and amounts set aside for the outcome of external tax
audits and legal proceedings.
The sundry long-term provisions include identifiable obligations toward third parties, which are costed in full.
ANALYSIS OF SUNDRY LONG-TERM PROVISIONS BY FUNCTION
in million euros
Sales
Dec. 31, 2006
Dec. 31, 2007
5
8
Personnel
37
38
Production and engineering
50
50
Administration
24
23
116
119
Total
100
Annual Report 2007
(30) Long-term borrowings
The maturities of these obligations at December 31, 2006 were:
ANALYSIS
Residual term
in million euros
more than
5 years
between 1
and 5 years
Dec. 31, 2006
Total
Bonds
(of which amounts secured)
2,253
–
2,253
(12)
Bank loans and overdrafts1)
10
16
26
(12)
Other financial liabilities
–
43
43
(2)
2,263
59
2,322
Total
1)
obligations with variable rates of interest or interest rates pegged for less than one year
The bonds issued by Henkel KGaA at December 31, 2006 included the following:
BONDS
in million euros
Issued by
Henkel KGaA
Interest rate swap
(3-month Euribor +0.405%)
Henkel KGaA
Interest rate swap
Type Nominal value
Book value Market value1)
980
Interest rate2)
Interest fixed
997
4.2500
until 20133)
Bond
1,000
Receiver swap
1,000
–15
–15
4.0671
3 months
Hybrid bond
1,300
1,265
1,244
5.3750
until 20154)
Receiver swap
650
–30
–30
5.4182
3 months
1)
market value of the bonds derived from the stock market price at December 31, 2006
2)
interest rate on December 31, 2006
3)
fixed-rate interest of bond coupon: 4.25 percent, converted using interest rate swaps into a floating interest rate, interest rate to be fixed next on March 12, 2007
(fair value hedge)
4)
fixed-rate interest of bond coupon: 5.375 percent, 50 percent converted using interest rate swaps into a floating interest rate, interest rate to be fixed next on
February 26, 2007 (fair value hedge)
Maturities of long-term borrowings at December 31, 2007:
ANALYSIS
Residual term
more than
5 years
between 1
and 5 years
Dec. 31, 2007
Total
Bonds
2,218
2
2,220
(9)
Bank loans and overdrafts1)
10
26
36
(28)
–
48
48
(–)
2,228
76
2,304
Total
1)
obligations with variable rates of interest or interest rates pegged for less than one year
Annual Report 2007
101
in million euros
The bonds issued by Henkel KGaA at December 31, 2007 were as follows:
BONDS
in million euros
Issued by
Type Nominal value
Henkel KGaA
Interest rate swap
Henkel KGaA
Interest rate swap
Book value Market value1)
962
Interest rate2)
Interest fixed
965
4.2500
until 20133)
Bond
1,000
Receiver swap
1,000
–35
–35
5.2891
3 months
Hybrid bond
1,300
1,249
1,179
5.3750
until 20154)
Receiver swap
650
–48
–48
6.4772
3 months
1)
market value of the bonds derived from the stock market price at December 31, 2007
2)
interest rate on December 31, 2007
3)
fixed-rate interest of bond coupon: 4.25 percent, converted using interest rate swaps into a floating interest rate, interest rate to be fixed next on March 10, 2008
(fair value hedge)
4)
fixed-rate interest of bond coupon: 5.375 percent, 50 percent converted using interest rate swaps into a floating interest rate, interest rate to be fixed next
on February 25, 2008 (fair value hedge)
The bond issued by Henkel KGaA for 1 billion euros in 2003 with a coupon of 4.25 percent matures in June 2013.
The 1.3 billion euro subordinated hybrid bond issued by Henkel KGaA in November 2005 to finance a large part of
the pension obligations in Germany matures in 99 years in 2104. Under the terms of the bond, the coupon for the first
ten years is 5.375 percent. After that period, from November 25, 2015, it will be possible to redeem the bond. If it is not
redeemed, the bond interest will be based on the 3-month Euribor interest rate plus a premium of 2.85 percent. The
bond terms also stipulate that if there is a “cash flow event”, Henkel KGaA has the option or the obligation to defer
the interest payments. A cash flow event is deemed to have occurred if the adjusted cash flow from operating activities
is below a certain percentage of the net liabilities (20 percent for optional interest deferral, 15 percent for mandatory
interest deferral); see §3(4) of the bond terms and conditions for the definition. On the basis of the cash flow calculated
at December 31, 2007, the percentage was +80.28 percent (2006: +50.92 percent).
(31) Non-current financial liabilities
Non-current financial liabilities comprise amounts due to employees of 61 million euros (2006: 71 million euros) and
derivatives at fair values of 83 million euros (2006: 45 million euros).
(32) Other non-current liabilities
Other non-current liabilities comprise advance payments and sundry deferred income.
(33) Deferred taxes
The provisions for deferred taxes relate to differences between the accounting base in the consolidated balance sheet and
the tax base used by the individual companies included in the consolidation to calculate their taxable profits (Note 9).
(34) Current provisions
CHANGES IN 2006
At Jan. 1,
2006
Other
changes
Utilized
Released
Added
At Dec. 31,
2006
110
44
107
35
96
108
Sundry current provisions
711
44
709
39
832
839
in million euros
111
31
97
–
–
45
Total
932
119
913
74
928
992
Other tax provisions of 4 million euros were reclassified in sundry current provisions.
102
Annual Report 2007
CHANGES IN 2007
At Jan. 1,
2007
Other
changes
Utilized
Released
Added
At Dec. 31,
2007
108
28
115
34
165
152
Sundry current provisions
839
12
750
35
689
755
in million euros
Total
45
10
47
–
–
8
992
50
912
69
854
915
The amounts recognized as current provisions are the best estimates of the expenditure required to settle the present
obligations at the balance sheet date.
ANALYSIS OF SUNDRY CURRENT PROVISIONS BY FUNCTION
Dec. 31, 2006
Dec. 31, 2007
Sales
268
175
Personnel
314
330
in million euros
21
28
Administration
236
222
Total
839
755
Dec. 31, 2006
Total
Dec. 31, 2007
Total
31
31
147
10
(35) Short-term borrowings
ANALYSIS
in million euros
Bond interest liabilities
Commercial papers1)
Loans from employee welfare funds of the Henkel Group
Bank loans and overdrafts
Total
1)
4
2
401
(33)
368
(228)
429
427
1,012
838
from the euro and US dollar Commercial Paper Program (total amount 2.1 billion euros)
Other financial liabilities comprise mainly interest-bearing loans from third parties. The market value of short-term
borrowings is the same as their book value, due to their short-term nature.
(36) Trade accounts payable
Trade accounts payable include purchase invoices and accruals for invoices outstanding in respect of goods and services
received.
ANALYSIS
in million euros
Amounts due to non-consolidated affiliated companies
Dec. 31, 2006
Total
Dec. 31, 2007
Total
9
16
Derivatives with negative fair values
12
149
Sundry current financial liabilities
72
(–)
81
(–)
Total
93
246
Annual Report 2007
103
(37) Current financial liabilities
Sundry current liabilities include the following:
» Amounts due to customers of 27 million euros (2006: 26 million euros)
» Commission payable of 3 million euros (2006: 4 million euros)
» Amounts due to employees of 42 million euros (2006: 40 million euros)
(38) Other current liabilities
Other current liabilities include sundry deferred income and the following:
» Liabilities in respect of social security of 22 million euros (2006: 22 million euros)
» Advance payments received of 3 million euros (2006: 4 million euros)
» Liabilities relating to employees’ deductions of 40 million euros (2006: 42 million euros)
» Other tax liabilities of 94 million euros (2006: 97 million euros)
(39) Contingent liabilities
ANALYSIS
in million euros
Bills and notes discounted
Liabilities under guarantee and warranty agreements
Dec. 31, 2006
Dec. 31, 2007
–
1
17
12
(40) Other financial commitments
Payment obligations under rent, leasehold and lease agreements are shown at the total amounts payable up to the earliest date when they can be terminated. The amounts shown are the nominal values. At December 31, 2007, they were
due for payment as follows:
RENT, LEASEHOLD AND LEASE COMMITMENTS
in million euros
Due in the following year
Due within 1 to 5 years
Due after 5 years
Total
Dec. 31, 2006
Dec. 31, 2007
36
94
35
90
18
148
3
128
In the course of the 2007 fiscal year, 13 million euros became due for payment under operating leases (2006:
27 million euros).
The order commitments for property, plant and equipment amounted to 42 million euros at the end of 2007 (2006:
68 million euros) and the purchase commitments from toll manufacturing contracts amounted to 15 million euros
(2006: 31 million euros).
Payment commitments under the terms of agreements for capital increases and share purchases signed prior to
December 31, 2007 amounted to 19 million euros (2006: 22 million euros).
When the back-to-back agreement between Akzo Nobel nv and Henkel KGaA for the National Starch businesses is
closed, which we expect to happen at the beginning of April 2008, the purchase price of 2.7 billion pounds sterling
(GBP) will become due.
(41) Capital management
The aims of capital management are derived from the financial strategy of the Group. These include ensuring liquidity
and access to the capital market at all times.
To achieve the capital management targets, the Group seeks to optimize its capital structure, vary the level of the
dividend, take equity measures, make acquisitions and divestments and reduce debt.
In the past fiscal year, the dividend was increased for ordinary and preferred shares. The cash flow not required for investment and dividend payments was used to reduce net debt. Short-term financing requirements were met by commercial
papers and bank loans. The bonds outstanding (senior and hybrid bonds) serve to cover long-term financing requirements.
104
Annual Report 2007
Our financial management is based on the key performance indicators set out in our financial strategy. Interest coverage
ratio in 2007 was 9.4 (2006: 9.4), while operating debt coverage was 74.3 percent (2006: 48.4 percent). The equity ratio was
43.7 percent (2006: 41.6 percent) and gearing was 0.41 (2006: 0.58). For further details, see the financial ratios section
in the Group management report (page 44).
Due to the international nature of its business, the Group is required to comply with different legal and regulatory
provisions in different regions. The status of these regulations and any developments are monitored at the local level as
well as centrally, with changes being taken into account for the purpose of capital management.
(42) Derivatives and other financial instruments
Treasury guidelines and systems
The Corporate Treasury department manages currency exposure and interest rates centrally for the Group and therefore
all transactions with financial derivatives and other financial instruments. Trading, treasury control and settlement
(front, middle and back offices) are separated both physically and in terms of organization. The parties to the contracts
are German and international banks which Henkel monitors regularly, in accordance with Corporate Treasury guidelines,
for creditworthiness and the quality of their quotations. Financial derivatives are used to manage currency exposure and
interest rate risks in connection with operating activities and the resultant financing requirements, again in accordance
with the Treasury guidelines. Financial derivatives are entered into exclusively for hedging purposes.
The currency and interest rate risk management of the Group is supported by an integrated Treasury system, which is
used to identify, measure and analyze the Group’s currency exposure and interest rate risks. In this context, “integrated”
means that the entire process from the initial recording of financial transactions to their entry in the accounts is covered.
Much of the currency trading takes place on internet-based, multi-bank dealing platforms. These foreign currency transactions are automatically transferred into the Treasury system. The currency exposure and interest rate risks reported
by all subsidiaries under standardized reporting procedures are integrated into the Treasury system by data transfer.
As a result, it is possible to retrieve and measure at any time all currency and interest rate risks across the Group and
all derivatives entered into to hedge the exposure to these risks. The Treasury system supports the use of various risk
concepts, so that, for example, the risk positions and the success of the risk management in each company, country and
group of countries can be determined on a mark-to-market basis at any time and compared to a benchmark.
Recognition and measurement of financial instruments
Financial instruments are measured initially at cost. Portfolios of marketable securities which are managed on a portfolio basis, and other investments quoted on the stock exchange, are categorized and recognized at fair value through
profit or loss in accordance with IAS 39. Changes in fair value are recognized in financial items in the statement of
income. Other marketable securities and other investments held as non-current assets are classified as available for sale
and also recognized at fair value where this can be reliably determined. Changes in fair value are recognized directly in
equity unless the asset is permanently impaired, in which case the impairment loss is recognized in profit or loss. If the
fair value of other marketable securities and other investments cannot be reliably determined, they are subsequently
measured at amortized cost. Shares in affiliated companies are measured at amortized cost as their fair value cannot
loans and receivables, and stated at amortized cost.
SPECIFIC FINANCIAL INSTRUMENTS BY CATEGORY
Dec. 31, 2006
Dec. 31, 2007
748
11
– at fair value through profit or loss
748
–
–
11
66
33
in million euros
– at fair value recognized in equity
Other investments/Shares in affiliated companies
– at fair value through profit or loss
– at amortized cost
6
5
60
28
Annual Report 2007
105
be reliably determined. These are also included in the available-for-sale category. Long-term loans are accounted for in
Financial liabilities with a fixed maturity are measured at amortized cost using the effective interest method. Financial
liabilities in respect of which a hedging transaction has been entered into, and which meet the conditions set out in
IAS 39 regarding a hedging relationship, are measured under hedge accounting rules.
All derivative financial instruments entered into by the Group are measured initially at cost and subsequently at
their fair values on the balance sheet date. The accounting treatment of gains and losses on remeasurement to fair value
depends on whether the conditions set out in IAS 39 with respect to hedge accounting have been met.
Hedge accounting is not used for the majority of derivative financial instruments. The changes in the fair value of
those derivatives which, from an economic point of view, represent effective hedges in line with the corporate strategy,
are recognized in profit or loss. These are virtually matched by changes in the fair value of the hedged underlying
transactions.
Under hedge accounting, a derivative financial instrument is identified as a hedge of the exposure to changes in
the fair value of an asset or a liability (fair value hedge), a hedge of the exposure to variability in future cash flows (cash
flow hedge) or a hedge of a net investment in a foreign entity.
Fair value hedges: The gain or loss from remeasuring derivatives used to hedge the exposure to changes in fair value
is recognized in profit or loss together with the gain or loss on the hedged item. The interest rate derivatives used to
hedge the exposure to interest rate risks arising from the bonds issued by Henkel KGaA qualify as fair value hedges. To
determine the fair value of the bonds (see Note 30, page 101 f.), only that portion of the bond which relates to the hedged
interest rate risk is taken into account.
Interest rate hedging instruments at the balance sheet date had negative fair values of 83 million euros (2006: negative
fair values of 45 million euros). The gain or loss on remeasuring the derivatives (2007: loss of 38 million euros, 2006: loss
of 83 million euros) and the gain or loss on the hedged bonds (2007: gain of 34 million euros, 2006: gain of 79 million
euros) have both been included in financial items in the statement of income.
Cash flow hedges: Changes in the fair value of derivatives used to hedge the exposure to variability in cash flows
are recognized directly in equity. The portion of the gain or loss on the derivative that is determined to be ineffective in
respect of the risk being hedged is reported directly in the consolidated statement of income. If a firm commitment or
an expected and highly probable future transaction results in the recognition of an asset or a liability, the accumulated
gains or losses on the hedging instrument that were recognized directly in equity are included in the initial measurement of the asset or liability. Otherwise, the amounts recognized directly in equity are included in the statement of
income in those reporting periods in which the hedged transaction impacts the statement of income. In the past fiscal
year, a cash flow hedge was entered into and the associated gains or losses on remeasurement after taking deferred tax
into account were recognized directly in equity. There were no ineffective portions of the hedge and no amounts were
transferred in the course of the year from equity to the statement of income.
CASH FLOW HEDGES
(after deferred tax)
in million euros
2007
2006
At January 1
Additions
(taken to equity)
Disposals
(taken to profit or loss)
At December 31
–
–
–95
–
–
–
–95
–
This cash flow hedge relates to the hedging of part of the purchase price payment in pounds sterling (GBP) for National
Starch businesses arising from the back-to-back agreement with Akzo Nobel nv. The fair value of the forward exchange
contracts was –130 million euros. The cash flow from the transactions hedged at December 31, 2007 is expected at the
beginning of April 2008.
Hedge of a net investment in a foreign entity: Hedges of net investments in foreign entities are accounted for
similarly to cash flow hedges. This is the case with forward exchange contracts that are used to hedge the exposure to
currency translation risks in foreign entities.
106
Annual Report 2007
In the past fiscal year, hedges of a net investment in a foreign entity were entered into and the associated gains or losses
on remeasurement, after taking deferred tax into account, together with any gains or losses on the translation of the
financial statements of foreign companies, were recognized directly in equity. As in 2006, no hedges of a net investment
in a foreign entity were transferred from equity to the statement of income, nor were any ineffective portions of hedges
included in the statement of income.
HEDGE OF A NET INVESTMENT IN A FOREIGN ENTITY
(after deferred tax)
in million euros
At January 1
Additions
(taken to equity)
At December 31
Disposals
(taken to profit or loss)
2007
–20
+3
–
–17
2006
–23
+3
–
–20
The hedges relate to translation risks arising from net investments in Swiss francs (CHF) and US dollars (USD). The fair
value of the open forward exchange contracts at the balance sheet date was 2 million euros (2006: 0 million euros).
Fair values of derivative financial instruments
The fair values of forward exchange contracts are calculated on the basis of current European Central Bank reference
prices taking account of forward premiums and discounts. Currency options are measured using market quotations or
recognized option pricing models. The fair values of interest rate hedging instruments are determined on the basis of
discounted future expected cash flows, using the market interest rates ruling over the remaining terms of the derivatives. These are shown in the table below for the four most important currencies. In each case, these are the interest
rates quoted on the inter-bank market at December 31.
INTEREST RATES IN PERCENT PER ANNUM
EUR
At December 31
USD
JPY
GBP
Maturities
2006
2007
2006
2007
2006
2007
2006
2007
3 months
3.71
4.65
5.33
4.85
0.54
0.93
5.26
5.95
6 months
3.84
4.63
5.33
4.63
0.61
0.97
5.39
5.83
1 year
4.02
4.69
5.31
4.26
0.73
1.05
5.51
5.58
2 years
4.11
4.46
5.16
3.81
0.93
0.92
5.51
5.21
5 years
4.09
4.49
5.07
4.22
1.38
1.19
5.37
5.08
10 years
4.16
4.68
5.18
4.77
1.84
1.69
5.07
4.99
Derivative financial instruments with a positive fair value at the balance sheet date are included in other financial
assets and those with a negative fair value are included in financial liabilities.
The following positions were held at the balance sheet date:
DERIVATIVE FINANCIAL INSTRUMENTS
Nominal value
2007
2006
Forward exchange contracts1)
(of which for hedging
loans within the Group)
4,183
7,087
41
56
–12
–147
(3,689)
(2,115)
(36)
(39)
(–8)
(–5)
60
–
–
–
–
–
Interest rate swaps2)
1,650
1,650
–
–
–45
–83
Other interest rate hedging instruments1)
Total derivative financial instruments
–
5,893
5,563
14,300
–
41
3
59
–
–57
–2
–232
Currency options1)
1)
2)
Positive fair value
2007
2006
Negative fair value
2007
2006
maturity period < 1 year
maturity period > 1 year
Most of the forward exchange contracts and currency options hedge risks arising from trade accounts receivable and
Group financing in US dollars.
Annual Report 2007
107
At December 31 in million euros
Risks arising from financial instruments
Credit risk
In the course of its business activities with third parties, the Henkel Group is exposed to global credit risk in various lines
of business. The risk arises if a contracting party fails to meet its obligations. The maximum credit risk is represented
by the book value of the financial assets recognized in the balance sheet.
A credit risk management system operating on the basis of a globally applied credit policy ensures that credit risks
are constantly monitored and bad debts minimized. This policy, which applies to both new and existing customers,
governs the allocation of credit limits and compliance with those limits, individual analyses of customers’ creditworthiness employing both internal and external financial information, risk classification and continuous monitoring of
the risk of bad debts at regional and local levels. In addition, hedging measures are implemented on a selective basis
for particular countries and customers.
As regards financial investment and derivatives trading with German and international banks, Henkel only enters
into transactions with counterparties of the highest financial standing. Financial investment is generally for periods of
less than one year. To minimize the credit risk, netting arrangements are agreed with counterparties and investment
limits set. These limits are based on the credit rating of the counterparty and regularly monitored, with adjustments
being made if necessary.
Collateral and other safeguards include country-specific and customer-specific protection afforded by credit insurance,
confirmed and unconfirmed letters of credit in the export business, as well as warranties, guarantees and cover notes.
The book value of receivables and loans which were potentially overdue or impaired, for which new due dates have
been negotiated, is 0 million euros (2006: 3 million euros).
Aging analysis of non-impaired loans and receivables
ANALYSIS
Less than 30 days
30 to 60 days
61 to 90 days
91 to 180 days
Total
312
42
15
5
374
237
44
20
4
305
in million euros
In 2007, specific allowances for bad debts of 24 million euros (2006: 38 million euros) and general allowances for bad
debts of 3 million euros (2006: 3 million euros) were made in respect of loans and receivables.
Liquidity risk
The liquidity risk of the Henkel Group can be regarded as very low, because of the use of long-term financing instruments
and the availability of additional liquidity reserves. The Group has pledged credit lines of 2.1 billion euros at its disposal
to ensure its liquidity and financial flexibility at all times. These credit lines were opened to secure the Commercial
Paper Program. To finance the acquisition of the National Starch businesses, the Henkel Group has already received
loan undertakings of 2.6 billion euros.
108
Annual Report 2007
CASH FLOWS FROM FINANCIAL LIABILITIES
Residual term
in million euros
Dec. 31,
2006
Book value
Up to 1 year
Between 1
and 5 years
More than
5 years
Dec. 31,
2006
Total cash
flow
2,284
143
449
2,673
3,265
Commercial papers
147
147
–
–
147
427
407
19
12
438
Bonds1)
2)
Derivative financial instruments
Interest-bearing loans from third parties
3)
Sundry financial instruments
Total
4
4
–
–
4
57
16
21
–2
35
1,494
1,494
–
–
1,494
468
443
42
–
485
158
84
40
34
158
5,039
2,738
571
2,717
6,026
1)
the cash flows from the hybrid bond issued in 2005 are disclosed for the period until the first possible redemption date by Henkel on November 25, 2015 2) from the euro
and US dollar Commercial Paper Program (total amount: 2.1 billion euros) 3) sundry financial instruments include amounts due from employees and finance bills
CASH FLOWS FROM FINANCIAL LIABILITIES
Residual term
in million euros
Bonds1)
Commercial papers2)
Derivative financial instruments
Interest-bearing loans from third parties
3)
Sundry financial instruments
Total
Dec. 31,
2007
Book value
Up to 1 year
Between 1
and 5 years
More than
5 years
Dec. 31,
2007
Total cash
flow
2,251
143
451
2,560
3,154
10
10
–
–
10
404
374
32
12
418
2
2
–
–
2
232
164
47
5
216
1,477
1,477
–
–
1,477
473
446
52
–
498
163
101
48
14
163
5,012
2,717
630
2,591
5,938
1)
the cash flows from the hybrid bond issued in 2005 are disclosed for the period until the first possible redemption date by Henkel on November 25, 2015 2) from the euro
and US dollar Commercial Paper Program (total amount: 2.1 billion euros) 3) sundry financial instruments include amounts due from employees and finance bills
Market risk
The market risk arising from financial instruments principally consists of currency and interest rate risks. This is monitored by means of sensitivity analyses.
The global nature of our business activities results in a huge number of cash flows in different currencies. Hedging
the resulting exchange rate risks is a significant part of our centralized risk management system. The objective of our
currency hedging is to fix prices based on hedging rates, so that we are protected from future adverse fluctuations in
exchange rates. More detailed information about our currency management objectives and procedures are given in the
Group management report on page 67.
The following table shows the value-at-risk analysis of the transaction risk of the Henkel Group at the balance sheet
date. The value-at-risk analysis assumes a risk horizon of one month and a unilateral confidence interval of 95 percent.
The calculation is based on the variance-covariance approach. Fluctuations and correlations are determined on the basis
of historical data. The value-at-risk analysis is based on the operating book positions and budgeted positions in foreign
currency, with a 9-month forecasting horizon.
Annual Report 2007
109
Currency risk
VALUE-AT-RISK
in million euros
After hedging
Dec. 31, 2006
Dec. 31, 2007
11
19
The amounts shown represent the maximum expected risk of loss in a reporting month as a result of currency fluctuations. The risk arises from imports and exports by Henkel KGaA and its foreign subsidiaries. Due to its international
nature, the Henkel Group has a portfolio with more than 50 different currencies.
Interest rate risk
The Henkel Group obtains the cash it requires from the international money and capital markets. Some of the resulting
financial liabilities and our cash deposits may be exposed to the risk of changes in interest rates. The aim of our centralized interest rate management system is to control and optimize this risk. More detailed information about our interest
rate management objectives and procedures are given in the Group management report on page 67.
The risk of interest rate fluctuations on the earnings of the Henkel Group is shown in the basis point value (BPV)
analysis in the table below.
INTEREST RATE RISE
in million euros
Based on an increase in the interest rate of 100 basis points
Dec. 31, 2006
Dec. 31, 2007
18
8
The calculation of the interest rate risk is based on a cash flow sensitivity analysis. This analysis examines all the main
financial instruments which attract interest at a variable rate at the balance sheet date. Fixed-rate instruments and
interest hedging instruments are deducted from net borrowings (comprising liquid funds, marketable securities and
short-term and long-term borrowings). The interest risk figures shown in the table are based on this calculation at the
relevant balance sheet date, assuming a parallel shift in the interest curve of 100 basis points. Interest rate risks arise
mainly from interest-bearing financial instruments in euros and US dollars.
110
Annual Report 2007
Supplementary Information on the Consolidated
Statement of Income/Balance Sheet
(43) Cost of materials
COST OF MATERIALS
in million euros
2006
2007
Cost of raw materials, supplies and merchandise
5,237
5,171
324
485
Cost of external services
Total
5,561
5,656
43.6 %
43.3 %
in million euros
2006
2007
Wages and salaries
1,856
1,885
342
337
Cost of materials ratio = Cost of materials / sales
(44) Payroll costs
PAYROLL COSTS
Social security contributions and staff welfare costs
Pension costs
Total
Payroll costs ratio = Payroll costs / sales
153
126
2,351
2,348
18.5 %
18.0 %
Share-based payment plans
The objective of the Henkel Stock Incentive Plan introduced in 2000 is to provide additional motivation for about 700
senior executive personnel around the world. Participants in the plan are granted option rights to subscribe for Henkel
preferred shares, which may be exercised within a period not exceeding five years once a vesting period of three years
has elapsed. Under the plan, rights were issued annually on a revolving basis, the relevant terms being revised each year
by the Management Board and Shareholders’ Committee. In 2004, options were issued for the last time, in this case to
the members of the Management Board.
Each option granted originally carried the right to acquire up to eight Henkel preferred shares. After the 1:3 share
split on June 18, 2007, the number of preferred shares per option right was trebled. The exact number of shares that
can be bought per option at a specific price depends on the extent to which the performance targets are met. One target
is based on absolute performance – the performance of the Henkel preferred share price. The other takes into account
relative performance, comparing the movement in value of the Henkel preferred share with that of the Dow Jones Euro
Stoxx (600) index. For both performance targets, the average market price of the Henkel preferred share at the date of
issue is compared with the average market price three years later. The average market price is calculated in each case
on the basis of 20 stock exchange trading days after the Annual General Meeting. For options issued prior to 2002, a
and benefits into account as well as movements in the share price (total shareholder return). The subscription rights
attached to an option are split into two categories. Taking the share split into account, up to 15 subscription rights can
be exercised by reference to the absolute performance and up to nine subscription rights by reference to the relative
performance.
Option rights are granted to members of the Management Board and corporate vice presidents, and to managers of
comparable status within German and foreign affiliated companies, on condition that they make a direct investment
of three preferred shares for each option right.
On February 19, 2004, IFRS 2 (Share-based Payment) was issued. We have applied this standard effective January 1,
2005. As a result, the total value of stock options granted to senior executive personnel at the grant date is determined
using an option pricing model. The total value of the stock options calculated in this way is treated as a payroll cost
Annual Report 2007
111
period of 60 trading days is applied. The calculation of relative performance takes dividend payments and other rights
spread over the period in which the corporation receives the service of the employee. For fiscal years from 2005 onward,
this cost in respect of the option rights granted in 2003 (tranche 4) and 2004 (tranche 5) is required to be expensed.
The table shows the number of option rights granted per tranche and the number of shares in the various tranches,
taking into account the 1:3 share split of June 18, 2007. The vesting period has expired for all the tranches. The table
also shows the expense for the period resulting from the valuation of each tranche issued.
In 2004 for the fourth tranche and in 2007 for the fifth tranche, management decided to avail itself of the right to
pay in cash the gain arising on the exercise of the options to the employees participating in the plan. The fifth tranche
is treated as if it had been paid in shares.
OPTION RIGHTS/SUBSCRIBABLE SHARES
in number of shares/options
1st tranche
2nd tranche
3rd tranche
4th tranche
5th tranche
Total
At January 1, 2007
27,695
32,358
46,910
61,774
12,600
181,337
expressed in shares
249,255
291,225
422,190
926,604
264,600
2,153,874
Options granted
expressed in shares
Options exercised1)
expressed in shares
2,385
6,945
–
10,800
21,465
104,175
–
138,870
5,278
6,279
7,536
11,913
3,600
34,606
56,515
67,825
178,684
75,600
426,1292)
expressed in shares
expressed in shares
1,260
11,340
47,505
Options forfeited
210
1,890
630
525
315
915
–
2,385
5,670
4,725
2,835
13,725
–
26,955
21,997
26,814
41,444
55,891
9,000
155,146
197,970
241,325
372,995
838,370
189,000
1,839,660
of which held by the Management Board
1,780
1,780
8,300
8,300
9,000
29,160
expressed in shares
16,020
16,020
74,700
124,500
189,000
420,240
of which held by other senior executives
20,217
25,034
33,144
47,591
–
125,986
181,950
225,305
298,295
713,870
–
1,419,420
Payroll costs 2007
expressed in shares
in million euros
–
–
–
3.6
0.1
3.7
Payroll costs 2006
in million euros
–
–
–
7.5
0.3
7.8
1)
average price at exercise date = 38.43 euros
2)
there is a timing difference between this figure and the figure given in Note 23
At December 31, 2007, there is a provision of 16.8 million euros (2006: 16.6 million euros) in respect of the fourth tranche.
The intrinsic value of the exercisable options in the fourth tranche at the end of the fiscal year is 16.1 million euros
(2006: 16.6 million euros).
The costs are calculated on the basis of the Black-Scholes option pricing model, modified to reflect the special features
of the Stock Incentive Plan. The cost calculation was based on the following factors:
BLACK-SCHOLES OPTION PRICING MODEL
At
On issue Dec. 31, 2007
3rd tranche
4th tranche
On issue
1st tranche
On issue
2nd tranche
in euros
63.13
71.23
74.67
57.66
71.28
in euros
21.04
23.74
24.89
19.22
23.76
Expected volatility of the share price
in %
35.0
33.1
32.4
20.3
26.6
Expected volatility of the index
in %
19.7
20.7
22.4
–
18.6
Expected lapse rate
in %
3
3
3
–
–
Risk-free interest rate
in %
5.19
4.18
4.78
4.06
3.96
Exercise price (before share split)
Exercise price (after share split)
112
Annual Report 2007
On issue
5th tranche
The expected volatility rates are based on the historic volatility of the Henkel preferred share and of the Dow Jones Euro
Stoxx (600) index. The period to which the estimate of the volatility of the Henkel share relates starts at the beginning
of the remaining term of the option tranche and finishes on the date on which the tranche is valued.
The performance period relating to the first tranche ended on July 10, 2003, that of the second tranche on July 12,
2004, that of the third tranche on May 16, 2005, that of the fourth tranche on May 11, 2006 and that of the fifth tranche
on May 15, 2007. Hereafter, at any time during a five-year period, the option holders in the first three tranches may exercise their right to acquire nine Henkel preferred shares per option. In the case of the fourth tranche, the option holders
may acquire 15 shares per option and in the case of the fifth tranche 21 shares per option. The allocation of nine shares
per option for the first tranche was made solely as a result of the Henkel preferred share outperforming the comparative
index (relative performance). The allocation for the fourth tranche was made solely as a result of the absolute performance.
The absolute performance targets were not met for the first three tranches and the relative performance target was not
met for the fourth tranche. The allocation for the fifth tranche was 15 shares as a result of absolute performance and
six shares as a result of relative performance. The options may be exercised at any time, except during blocked periods
which cover the four weeks prior to the reporting dates of the corporation.
Global Cash Performance Units (CPU Plan)
Since the end of the Stock Incentive Plan in 2004, those eligible for that plan, the senior executive personnel of the Henkel
Group (excluding members of the Management Board) have been part of the Global CPU Plan, which enables them to
participate in any increase in price of the Henkel preferred share. If certain set targets are achieved, Cash Performance
Units (CPUs) are granted, which give the member of the CPU Plan the right to receive a cash payment at a fixed point
in time. The CPUs are granted on condition that the member of the plan is employed for three years by Henkel KGaA or
one of its subsidiaries in a position senior enough to qualify to take part and that he or she is not under notice during
that period. This minimum period of employment pertains to the calendar year in which the CPUs are granted and the
two subsequent calendar years.
The number of CPUs granted depends not only on the seniority of the executive, but also on the achievement of set
target figures. For the periods to date, these targets have been operating profit (EBIT) and net earnings after minority
interests. The value of a CPU in each case is the average price of the Henkel preferred share as quoted 20 stock exchange
trading days after the Annual General Meeting following the performance period. In the case of exceptional increases in the
share price, there is an upper limit or cap. After the 1:3 share split of June 18, 2007, the number of CPUs was trebled.
The total value of CPUs granted to senior executive personnel is remeasured at each balance sheet date and treated
as a payroll cost over the period in which the plan member provides his or her services to Henkel. The first tranche,
which was issued in 2004, became due for payment in July 2007. Across the world, at December 31, 2007, the CPU Plan
comprised 372,429 CPUs issued in the second tranche in 2005 (expense: 5.9 million euros), 391,261 CPUs from the third
tranche issued in 2006 (expense: 5.4 million euros) and 356,346 CPUs from the fourth tranche issued in 2007 (expense:
4.5 million euros). The corresponding provision amounted to 28.4 million euros (2006: 25.6 million euros).
Cash Performance Units Program
For members of the Management Board, the Stock Incentive Plan was superseded in 2005 by a new program. Under this
preferred shares for each fiscal year or tranche, depending on the increase in share price over a period of three years (the
performance period) and on the increase in earnings per preferred share. At the end of the performance period, the actual
number and value of the shares is determined and the resulting tranche income paid net and in cash. Each member of
the Management Board participating in the tranche must personally invest in Henkel preferred shares to the value of
25 percent of the tranche income and place these in a blocked custody account with a five-year drawing restriction.
If there is an absolute increase in share price during the performance period of at least 15 percent, 21 percent or
30 percent, each participant in the plan receives the monetary value equivalent to 1,800, 3,600 or 5,400 shares respectively.
To calculate the increase in the share price, the average price in January of the year of issue of a tranche (base price) is
compared with the average price in January of the third fiscal year following the year of issue (reference price). If the
earnings per preferred share increase by at least 15 percent, 21 percent or 30 percent during the performance period,
Annual Report 2007
113
scheme, each eligible member of the Management Board is entitled to the monetary value of a total of up to 10,800 Henkel
each participant receives the monetary value equivalent to 1,800, 3,600 or 5,400 shares respectively. To calculate the
increase in earnings per preferred share, the earnings per preferred share of the fiscal year prior to the year of issue is
compared with the earnings per preferred share of the second fiscal year after the year of issue. The amounts included
in the calculation of the increase are in each case the earnings per preferred share as disclosed in the consolidated
financial statements of the relevant fiscal years, adjusted for exceptional items. The financial statements must have
been approved and an unqualified auditors’ opinion issued thereon. The monetary value of a share is equivalent to the
reference price of the Henkel preferred share. In the case of exceptional increases in the share price, there is an upper
limit or cap. The base prices for the 2005, 2006 and 2007 tranches were 22.14 euros, 29.35 euros and 39.04 euros respectively. We have based the measurement of the provision for this program on achieving intermediate targets. This results
in an expense of 2.1 million euros in the fiscal year. The provision at December 31, 2007 for all the tranches issued is
4.1 million euros (2006: 2.0 million euros).
(45) Employee structure
Annual average excluding apprentices and trainees, work experience students and interns, based on quarterly figures:
NUMBER OF EMPLOYEES PER FUNCTION
2006
2007
23,934
24,426
Marketing, selling and distribution
16,177
16,603
Research and development
2,794
2,794
Administration
8,811
8,480
51,716
52,303
Total
(46) Value added statement
VALUE ADDED STATEMENT
in million euros
Sales
Other income
Total sales/income
2006
in %
2007
in %
12,740
96.4
13,074
98.1
480
3.6
247
1.9
13,220
100.0
13,321
100.0
5,561
42.1
5,656
42.5
Other charges
Cost of materials
350
2.6
337
2.5
Other expenses
Amortization/depreciation of non-current assets
3,489
26.4
3,415
25.6
Value added
3,820
28.9
3,913
29.4
2,351
61.6
2,348
60.0
351
9.2
355
9.1
Paid to
employees
central and local government
Providers of capital
interest expense
247
6.5
269
6.9
shareholders
214
5.6
227
5.8
minority shareholders
16
0.4
20
0.5
Reinvested in the Group
641
16.7
694
17.7
(47) Group segment reporting
The primary format for reporting the activities of the Henkel Group by segment is by business sector and additionally
by region. This classification corresponds to the way in which the Group manages its operating business. The activities
of the Henkel Group are divided into the following operating segments: Laundry & Home Care, Cosmetics/Toiletries
and Adhesives Technologies.
114
Annual Report 2007
Laundry & Home Care
This business sector produces and sells detergents, laundry care products, dishwashing and cleaning products and
insecticides.
The product range of this business sector comprises hair cosmetics, body care, skin care and oral care products, and
hair salon products.
This business sector produces and sells cyanoacrylates, office products for gluing and correcting applications, adhesive
tapes, high-strength contact adhesives, adhesives for home decoration, building and DIY applications, adhesives and
sealants for industrial applications and products for surface treatment.
In determining the segment results and the asset and liability values, essentially the same principles of recognition
and measurement are applied as elsewhere in the consolidated financial statements.
For reconciliation with the figures for the Henkel Group, Group overheads and central research costs are reported under
Corporate together with income and expenses that cannot be allocated to the individual business sectors.
RECONCILIATION BETWEEN NET OPERATING ASSETS/CAPITAL EMPLOYED AND BALANCE SHEET FIGURES
Balance
sheet figures
Goodwill at book value
Other intangible assets and property,
plant and equipment (total)
Inventories
Annual average1) 2007
Dec. 31, 2007
Dec. 31, 2007
3,660
3,392
3,392
3,749
3,625
3,625
1,395
1,283
from third parties
1,990
1,694
Intra-Group trade
accounts receivable
826
732
Other assets and
tax refund claims2)
471
367
528
Financial assets
249
Deferred tax assets
1,283
Inventories
1,694
from third parties
712
1,440
125
1)
2)
Operating assets (gross)
12,091
11,093
– Operating liabilities
3,754
3,482
of which
to third parties
1,600
1,477
Intra-Group trade
accounts payable
826
732
Other provisions and
other liabilities2)
1,328
1,273
7,611
Net operating assets
8,337
– Goodwill at book value
3,660
+ Goodwill at cost
Capital employed
4,067
8,744
Goodwill at book value
Other intangible assets and property,
plant and equipment (total)
13,048
Other assets and
tax refund claims
Assets held for sale
Total assets
1,477
to third parties
1,754
Other provisions and
other liabilities
Net operating assets
in million euros
the annual average is calculated on the basis of the twelve monthly figures
only amounts relating to operating activities are taken into account in calculating net operating assets
Annual Report 2007
115
(48) Information on earnings per share
The Stock Incentive Plan (Note 44, page 111 ff.) currently results in a dilution of earnings per preferred share amounting
to 1 eurocent.
EARNINGS PER SHARE
2006
2007
Net earnings after minority interests
855
921
Dividends, ordinary shares
125
132
in million euros (rounded)
Dividends, preferred shares
86
92
Total dividends
211
224
Retained profit per ordinary share
388
419
Retained profit per preferred share
256
278
Retained profit
644
697
259,795,875
259,795,875
0.48
0.514)
Number of ordinary shares
Dividend per ordinary share in euros
Retained profit per ordinary share in euros
1.49
1.61
EPS per ordinary share in euros
1.97
2.12
171,813,918
172,951,042
0.50
0.534)
Number of outstanding preferred shares1)
Dividend per preferred share in euros
Retained profit per preferred share in euros
1.49
1.61
EPS per preferred share in euros
1.99
2.14
Number of potential outstanding preferred shares2)
172,885,068
173,371,289
Dividend per preferred share in euros
0.50
0.534)
Retained profit per preferred share in euros
1.48
1.60
3)
2.13
Diluted EPS per preferred share in euros
1.98
1)
2)
weighted annual average of preferred shares (Henkel buy-back program)
weighted annual average of preferred shares adjusted for the potential number of shares arising
4)
proposed
from the Stock Incentive Plan 3) based on earnings after minority interests of 854 million euros (IAS 33.59)
(49) Information on the cash flow statement
Cash flow from investing activities/acquisitions includes under the heading “Purchase of financial assets/acquisitions”
funds used to make acquisitions of 7 million euros (2006: 400 million euros). Of the 400 million euros used to fund acquisitions in 2006, 4 million euros related to the Laundry & Home Care business sector, 326 million euros to Cosmetics/
Toiletries and 70 million euros to Adhesives Technologies. The purchase of financial assets relates to an investment in
MATERNA Grundstücksvermietungsgesellschaft mbH & Co. OHG, Schönefeld, Germany.
The heading “Dividends and interest paid and received” includes dividends received from Ecolab Inc., St. Paul, Minnesota, USA of 29 million euros (2006: 24 million euros). Included in the figure for cash and cash equivalents are marketable
securities which are short-term in nature and are exposed only to an insignificant risk of a change in price.
(50) Related party transactions
Information required by §160 (1) No. 8 of the German Joint Stock Corporation Act (AktG):
The company has been notified that since July 8, 2004, a total of 44,583,767 votes before the share split (133,751,301
votes after the share split), representing in total 51.48 percent of the voting rights in Henkel KGaA, are held by:
» 62 members of the families of the descendants of Fritz Henkel, the company’s founder
» Two foundations set up by members of those families
» One civil-law partnership set up by members of those families
» 14 private limited companies set up by members of those families and one limited partnership with a limited company
as general partner (GmbH & Co. KG) under the terms of a share-pooling agreement (agreement restricting the transfer of shares) as envisaged in §22 (2) of the German Securities Trading Law (WpHG), whereby the shares held by the
14 private limited companies and by the limited partnership representing 17.74 percent are attributed (as envisaged
in §22 (1) No. 1 WpHG) to the family members who control those companies
116
Annual Report 2007
The notification referred to above stated that Dr. Christoph Henkel has exceeded the 5 percent threshold of voting
rights in Henkel KGaA, with voting rights attached to 5,044,139 ordinary shares in Henkel KGaA before the share split
(15,132,417 voting rights after the share split), representing a rounded percentage of 5.825 percent. No other party to
the share-pooling agreement has 5 percent or more of the total voting rights in Henkel KGaA, even after adding voting
rights expressly granted under the terms of usufruct agreements.
Mr. Albrecht Woeste, Düsseldorf, is the authorized representative of the parties to the Henkel share-pooling agreement.
Jahr Vermögensverwaltung GmbH & Co. KG, which originally held 6.11 percent of the voting rights in Henkel KGaA,
has informed us that its share of voting rights in Henkel KGaA fell below the 3 percent threshold on June 25, 2007 and
stood at 0.29 percent on that day, with 749,609 voting rights. At the same time on June 25, 2007, the voting agreement
between Jahr Vermögensverwaltung GmbH & Co. KG and the parties to the Henkel share-pooling agreement, according
to which the voting rights held by the parties to the share-pooling agreement were added to those of Jahr Vermögensverwaltung GmbH & Co. KG in accordance with §22 (2) WpHG, was terminated.
Members of the families of the descendants of Fritz Henkel, the company’s founder, who hold shares in Henkel KGaA,
and members of the Shareholders’ Committee advanced funds on loan to the Henkel Group in the year under review,
on which interest has been payable at an average rate of 4.18 percent (2006: 3.03 percent). The average total amount of
capital advanced to the Henkel Group in fiscal 2007 was 446 million euros (2006: 436 million euros), while the balance
at December 31, 2007 was 472 million euros (December 31, 2006: 467 million euros).
Members of the Supervisory Board who are not also members of the Shareholders’ Committee advanced funds on
loan to the Henkel Group in the year under review averaging 3.2 million euros (2006: 6.5 million euros), while the balance at December 31, 2007 was 6 million euros (December 31, 2006: 2 million euros) carrying an average interest rate
of 4.16 percent (2006: 3.03 percent).
At December 31, 2007, a loan to a member of the Management Board for 201,000 euros was included in miscellaneous
assets. The loan is secured by a real estate mortgage and has a residual term of two years. During the fiscal year, mortgage
payments totaling 100,000 euros were made in respect of the loan. The loan is subject to interest at the German Federal
Bank base rate up to a maximum of 5 percent.
In addition to the above, some companies in the Henkel Group and the associated company Ecolab Inc., St. Paul,
Minnesota, USA have supplied goods and services to each other on prevailing market terms in the course of their normal
business activities.
(51) Remuneration of the corporate bodies
The total remuneration of the members of the Supervisory Board amounted to 1,226k euros (2006: 1,163k euros), that
of the Shareholders’ Committee amounted to 2,260k euros (2006: 2,273k euros) and that of the Management Board
amounted to 16,219k euros (2006: 15,246k euros). For further details regarding the emoluments of the corporate bodies,
see the remuneration report on page 24 ff., which forms part of the Group management report.
(52) Declaration of compliance with the Corporate Governance Code
In February 2007, the Management Board, Supervisory Board and Shareholders’ Committee approved a joint declaration
of compliance with the recommendations of the German Corporate Governance Code in accordance with §161 of the
the company website: www.henkel.com/ir.
(53) Subsidiaries and other investments
Details relating to the investments held by Henkel KGaA and the Henkel Group are provided in a separate schedule which
will be available via the commercial register and can also be inspected at the Annual General Meeting.
Annual Report 2007
117
German Joint Stock Corporation Act (AktG). The declaration has been made permanently available to shareholders on
(54) Information on shares in affiliated companies and other investments
Major subsidiaries:
Holding in percent
Algeria
Henkel Algérie S.P.A.
Wilaya d’Alger
100.00
Australia
Henkel Australia Pty. Ltd.
Silverwater
100.00
Austria
Henkel Central Eastern Europe GmbH
Vienna
100.00
Belgium
Henkel Belgium N.V.
Brussels
100.00
Brazil
Henkel Ltda.
São Paulo
100.00
Canada
Henkel Canada Corporation
Halifax
100.00
Henkel Consumer Goods Canada Inc.
Toronto
100.00
China
Henkel (China) Co. Ltd.
Shanghai
Czech Republic
Henkel CR spol.s.r.o.
Prague
100.00
Egypt
Henkel Trading Egypt SAE
Cairo
100.00
France
Henkel France S.A.
Boulogne-Billancourt
100.00
Henkel Technologies France SAS
Boulogne-Billancourt
100.00
Germany
Schwarzkopf & Henkel Production Europe GmbH & Co. KG
Düsseldorf
100.00
Great Britain
Henkel Loctite Adhesives Ltd.
Hatfield
100.00
Henkel Ltd.
Hatfield
100.00
Hungary
Henkel Magyarország Kft
Budapest
100.00
Italy
Henkel Loctite Adesivi S.r.l.
Milan
100.00
Henkel S.p.A.
Ferentino
100.00
Japan
Henkel Japan Ltd.
Tokyo
100.00
Mexico
Henkel Capital S.A. de C.V.
Ecatepec de Morelos
100.00
Netherlands
Henkel Nederland B.V.
Nieuwegein
100.00
Poland
Henkel Polska Sp. z o.o.
Warsaw
100.00
Romania
Henkel Romania Srl
Bucharest
100.00
Russia
OAO Henkel ERA
Tosno
100.00
ZAO Schwarzkopf & Henkel
Moscow
100.00
Serbia
Henkel Merima d.o.o.
Krusevac
South Korea
Henkel Home Care Korea Ltd.
Seoul
100.00
97.49
97.27
Henkel Korea Ltd.
Jincheon-Kun
100.00
Spain
Henkel Ibérica S.A.
Barcelona
100.00
Switzerland
Henkel & Cie. AG
Pratteln
100.00
Turkey
Türk Henkel Kimya Sanayi ve Ticaret A.S.
Istanbul
100.00
Ukraine
Henkel Bautechnik (Ukraine) TOB
Vyshgorod
Henkel Ukraine TOW
Kiev
100.00
Dial Brands Holding, Inc.
Phoenix
100.00
Henkel Consumer Goods, Inc.
Dover
100.00
Henkel Corporation
Wilmington
100.00
The Dial Corporation
Wilmington
100.00
USA
66.00
In each of the following companies, Henkel holds, either directly or indirectly, not more than half of the shares, but has
the power to govern the financial and operating policies of the company. Therefore the company is consolidated:
Holding in percent
Austria
Biozym GmbH
Kundl
49.00
Bahrain
Henkel Adhesives Middle East E.C.
Bur Dubai
50.00
Egypt
Henkel Adhesives Trading Egypt SAE
Cairo
50.00
Henkel Polybit Egypt Co. Ltd.
Badr City
49.00
Henkel Technologies Egypt SAE
Cairo
50.00
Henkel Marketing India Ltd.
Hyderabad
48.94
India
118
Annual Report 2007
Holding in percent
Lebanon
Saudi Arabia
Detergenta Holding S.A.L.
Beirut
49.97
Henkel Lebanon S.A.L.
Beirut
50.00
Ashwa Technologies Ltd.
Jeddah
50.00
Saudi Arabian Adhesives Factory Ltd.
Riyadh
50.00
Syria
Henkel Syria S.A.S.
Aleppo
49.97
Tunisia
Société d’Importation et de Ventes d’Articles Chimiques
Tunis
24.99
Turkey
Eczacibasi Schwarzkopf Kuafor Urunleri Pazarlama A.S.
Istanbul
50.00
United Arab Emirates
Henkel Polybit Industries Co. Ltd.
Umm Al Quwain
49.00
Roof Care Co.
Sharjah
49.00
The following dormant companies or companies with insignificant operations are immaterial to the net assets, financial
position and results of operations of the Group and are stated at amortized cost:
Holding in percent
Argentina
The Dial Corporation Argentina S.A.
Austria
Persil-Altersunterstützung GmbH
Vienna
100.00
Schwarzkopf & Henkel GmbH
Vienna
100.00
Egypt
Henkel Building Chemicals Egypt SAE
Alexandria
72.69
Germany
CHEMPHAR Handels- und Exportgesellschaft mbH
Hamburg
100.00
Clynol GmbH
Hamburg
100.00
Entsorgungszentrum Düsseldorf Süd GmbH
Düsseldorf
Erste Deutsche Walfang GmbH
Hamburg
Fandus Grundstücksvermietungsgesellschaft
mbH & Co. Objekt Willich KG
Düsseldorf
Fix Point Vertriebs GmbH
Dinslaken
73.00
Forstverwaltung Brannenburg Geschäftsführungs-GmbH
Düsseldorf
100.00
Forstverwaltung Brannenburg GmbH & Co. OHG
Brannenburg
100.00
Hans Schwarzkopf & Henkel Verwaltungs-GmbH
Grünwald
100.00
Buenos Aires
100.00
50.00
100.00
Henkel Erste Verwaltungsgesellschaft mbH
Düsseldorf
100.00
Henkel Holding Verwaltungs-GmbH
Düsseldorf
100.00
Henkel Wasch- und Reinigungsmittel GmbH
Düsseldorf
100.00
Henkel Zweite Verwaltungsgesellschaft mbH
Düsseldorf
100.00
Indola GmbH
Hamburg
100.00
MATERNA GrundstücksVermietungsgesellschaft mbH & Co. OHG
Schönefeld
99.00
Phenion GmbH & Co. KG
Düsseldorf
100.00
Phenion Verwaltungs GmbH
Düsseldorf
100.00
Schwarzkopf & Henkel GmbH
Düsseldorf
100.00
Schwarzkopf & Henkel Production Management GmbH
Düsseldorf
100.00
Sovereign Specialty Chemicals GmbH
Düren
100.00
SusTech GmbH & Co. KG
Darmstadt
61.96
SusTech Verwaltungs GmbH
Darmstadt
64.29
Clynol Ltd.
Hatfield
100.00
Schwarzkopf Ltd.
Aylesbury
100.00
Iran Henkel AG
Tehran
100.00
Pharco Chemie AG
Tehran
100.00
Ireland
Chambois Ltd.
Cork
100.00
Singapore
Sovereign Specialty Chemicals (S) Pte. Ltd.
Singapore
100.00
Great Britain
Iran
Annual Report 2007
119
68.62
Holding in percent
Slovenia
Henkel-Storitve d.o.o.
Maribor
100.00
Switzerland
Steinfels Haushalt AG
Pratteln
100.00
USA
Dial Argentina Holdings, Inc.
Phoenix
100.00
FP Chemical Products L.P.
Wilmington
100.00
Pure & Natural Company
Phoenix
100.00
Henkel Zimbabwe (Private) Ltd.
Harare
Zimbabwe
76.60
Henkel KGaA holds more than 20 percent but less than 50 percent in the following companies, either directly or indirectly. As the holdings are immaterial to the net assets, financial position and results of operations of the Group, they
are stated at amortized cost:
Holding in percent
France
Natural Implant S.A.
Germany
DATASOUND Gesellschaft zur Entwicklung und Vermarktung digitaler Audio- und Informationssysteme mbH
Ludwigshafen
24.98
Great Britain
Ten Lifestyle Management Ltd.
London
36.72
Brest
24.79
Time Energy Network Ltd.
London
44.26
Guatemala
Tanques del Atlántico S.A.
Guatemala City
30.00
Mexico
Hysol Indael de México S.A. de C.V.
Mexico City
49.00
USA
AMT Capital L.P.
Dallas
20.90
(55) Investments in associates
Ecolab Inc., St. Paul, Minnesota, USA
Portfolio: Products and services for industrial and institutional hygiene, catering, food and textile hygiene, vehicle cleaning and automotive care, water treatment, pest control, commercial kitchen service.
» Henkel owns 72.7 million shares in Ecolab Inc., representing an interest of 29.5 percent
» We expect a 10 percent increase in sales to 5.4 billion US dollars in fiscal 2007
» The share price of Ecolab Inc. rose by 13.3 percent in 2007; the market value of our investment at December 31,
2007 was 3,723 million US dollars (2006: 3,286 million US dollars). This is equivalent to 2,529 million euros (2006:
2,495 million euros)
» We do not anticipate any material negative effects on equity in the annual financial statements of Ecolab Inc. which
go beyond the trends seen in the Q3 financial statements for 2007; these have already been recognized in the consolidated financial statements.
» At December 31, 2006, Ecolab Inc. reported assets of 4.4 billion US dollars, liabilities of 2.7 billion US dollars, sales of
4.9 billion US dollars and net earnings of 0.4 billion US dollars for fiscal 2006
(56) Auditors’ fees and services
The fees charged for the services of the auditors KPMG in the 2006 and 2007 fiscal years were as follows:
TYPE OF FEE
2006
2007
Audit (including outlays)
8.0
8.1
Audit-related services
0.4
0.2
Tax advisory services
0.0
0.1
in million euros
Other services
0.2
0.1
Total
8.6
8.5
120
Annual Report 2007
Audit fees comprise the total fees (including outlays) paid or payable to the KPMG organization in respect of the audit
of the Group accounts and reporting thereon, and the audit of the individual company financial statements of Henkel
KGaA and its affiliated companies as required by law.
Fees for audit-related services comprise fees for audits in connection with information risk management and audits
of compliance with contractual terms and conditions.
Tax advisory services include fees for tax advice relating to employees of Henkel KGaA who live outside Germany
and for employees of Henkel sent from Germany to work in Group companies outside Germany (International Executive
Services) and for performing tax compliance work for affiliated companies outside Germany.
Other services comprise fees for agreed-upon procedures and support for process improvement activities.
(57) Events after the balance sheet date
In keeping with our strategy to focus on our core businesses, on January 11, 2008, we sold our industrial water treatment
business to BK Giulini, Ludwigshafen, Germany, a subsidiary of Israel Chemicals Ltd. (ICL). This operation, a marginal
activity assigned to the Adhesives Technologies business sector, generated sales of 52 million euros in fiscal 2006.
In mid January 2008, we informed our employees in Avon, Ohio, USA, that we had reached an agreement with
Innovative Brands, a subsidiary of Najafi Companies, on the sale of the brands Duck, Painter’s Mate Green and Easy Liner
from our Consumer Adhesives business in North America. Closure of the transaction is pending, subject to antitrust
approval.
Recommendation for the Approval of the Annual Financial
Statements and the Appropriation of the Profit of Henkel KGaA
It is proposed that the annual financial statements of Henkel KGaA be approved as presented and that the unappropriated profit of 444,192,003.61 euros for the year ended December 31, 2007 be applied as follows:
a) Payment of a dividend of 0.51 euros per ordinary share on 259,795,875 shares
= 132,495,896.25 euros
b) Payment of a dividend of 0.53 euros per preferred share on 178,162,875 shares
= 94,426,323.75 euros
c) Carry-forward of the remaining amount of
217,269,783.61 euros
to the following year (retained earnings)
Shares held as treasury stock are not entitled to dividend. The amount in unappropriated profit which relates to the treasury stock held by the corporation at the date of the Annual General Meeting is carried forward to the following year.
Personally Liable Managing
Partner of Henkel KGaA
(Chairman of the Management Board)
Annual Report 2007
121
444,192,003.61 euros
Annual Financial Statements of Henkel KGaA
(summarized)1)
STATEMENT OF INCOME
in million euros
Sales
Cost of sales
Gross profit
Selling, research and administrative expenses
Other income (net of other expenses)
2006
2007
2,911
3,132
–1,956
–2,135
955
997
–1,183
–1,233
296
373
Operating profit
68
137
Financial result
294
440
Profit on ordinary activities
362
577
23
19
Earnings before tax
385
596
Taxes on income
–22
–13
Net earnings
363
583
3
152
Change in special accounts with reserve element
Profit brought forward
Transfer to retained earnings
Unappropriated profit2)
–3
–291
363
444
2006
2007
BALANCE SHEET
in million euros
Intangible assets and property, plant and equipment
671
687
Financial assets
8,047
7,681
Non-current assets
8,718
8,368
214
210
3,454
2,719
Inventories
Receivables and miscellaneous assets/Deferred charges
Liquid funds
Current assets
129
119
9
919
3,806
3,967
12,524
12,335
3,956
4,328
241
227
Provisions
2,425
2,513
Liabilities
5,902
5,267
12,524
12,335
Total assets
Special accounts with reserve element
Total equity and liabilities
1)
the full financial statements of Henkel KGaA with the auditors’ unqualified opinion are filed with the commercial register; copies can be obtained from Henkel KGaA
on request; the financial statements are based on the German Commercial Code (HGB)
2)
statement of income figures are rounded; unappropriated profit: 363,679,361.44 euros for 2006 and 444,192,003.61 euros for 2007
122
Annual Report 2007
Statement by the Management Board
The personally liable managing partner of Henkel KGaA is responsible for the preparation of the annual financial statements, the consolidated financial statements and the management reports of Henkel KGaA and the Group. The annual
financial statements, the consolidated financial statements and the management reports have been unanimously
approved by the members of the Management Board.
The consolidated financial statements have been prepared on the basis of International Financing Reporting Standards (IFRS) as adopted by the European Union.
The Management Board has taken steps to ensure the integrity of the reporting process and compliance with the
relevant legal regulations by establishing effective internal control systems at the companies which are included in
the consolidated financial statements. Appropriate training is provided to make sure that the employees responsible
are suitably qualified to meet the required standards. Staff training is centered around the corporation’s mission statement and principles and strategies developed within the corporation. Compliance with these principles is continually
monitored by the Management Board. Compliance with regulations and the reliability and functional efficiency of the
control systems are kept under constant review across the Group by the Internal Audit department.
These measures, coupled with reporting procedures based on standard guidelines throughout the Group, ensure that
the financial records properly reflect all business transactions. They also enable the Management Board to recognize
changes in business circumstances and the ensuing risks to assets and financial arrangements as they occur.
The risk management systems in place for Henkel KGaA and the Henkel Group ensure, in accordance with the requirements of company law, that any developments which could endanger the future of Henkel KGaA or of the Henkel
Group are recognized in good time and that appropriate measures can be taken where necessary. They also provide the
foundation for the accuracy of information disclosed in the consolidated financial statements and Group management
report and in the individual company financial statements incorporated therein.
The Management Board is committed to delivering a steady increase in shareholder value. The Group is managed on
principles of sustainable development in the interests of shareholders and in full awareness of its responsibility toward
employees, society and the environment in every country in which Henkel operates.
As required by §161 of the German Joint Stock Corporation Act (AktG), the Management Board, the Supervisory Board
and the Shareholders’ Committee have approved a joint declaration of compliance with the recommendations of the
German Corporate Governance Code.
KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft in accordance with a
resolution adopted by shareholders at the Annual General Meeting and as instructed by the Supervisory Board, has
audited the annual financial statements, the consolidated financial statements and the related management reports.
The auditors’ report on the consolidated financial statements and the Group management report is reproduced on
page 124. The annual financial statements, the consolidated financial statements, the management reports for Henkel
KGaA and the Group and the audit reports will be discussed in detail, with the auditors present, at a meeting of the
Supervisory Board held for that purpose.
The Management Board of Henkel KGaA
Annual Report 2007
123
Auditors’ Report
We have audited the consolidated financial statements prepared by Henkel Kommanditgesellschaft auf Aktien (Henkel
KGaA) – comprising the balance sheet and the related statements of income, recognized income and expense and cash
flows, and the notes to the consolidated financial statements, together with the Group management report for the
business year from January 1, 2007 to December 31, 2007. The preparation of the consolidated financial statements and
the Group management report in accordance with International Financial Reporting Standards (IFRS) as adopted by
the European Union, and the additional requirements of German commercial law pursuant to §315a(1) HGB (German
Commercial Code) are the responsibility of the legal representative of the Company. Our responsibility is to express an
opinion on the consolidated financial statements and on the Group management report based on our audit.
We conducted our audit of the consolidated financial statements in accordance with §317 HGB and German generally
accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (IDW) and in
supplementary compliance with International Standards on Auditing (ISA). Those standards require that we plan and
perform the audit such that misstatements materially affecting the presentation of the net assets, financial position
and results of operations in the consolidated financial statements prepared in accordance with the applicable financial
reporting framework, and in the Group management report, are detected with reasonable assurance. Knowledge of the
business activities and of the economic and legal environment in which the Henkel Group operates and expectations
as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the
accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial
statements and Group management report are examined primarily on a test basis within the framework of the audit.
The audit includes assessing the annual financial statements of those entities included in the consolidated financial
statements, the determination of the entities to be included in the consolidation, the accounting and consolidation
principles used and significant estimates made by the Company’s legal representative, as well as evaluating the overall
presentation of the consolidated financial statements and Group management report. We believe that our audit provides
a reasonable basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our audit, the consolidated financial statements comply with IFRS as adopted by the European Union and the additional requirements of German commercial law pursuant to §315a(1) HGB
and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance
with these requirements. The Group management report is consistent with the consolidated financial statements, and
as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks associated
with the Group’s future development.
KPMG Deutsche Treuhand-Gesellschaft
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Thomas Sauter
Michael Gewehr
Wirtschaftsprüfer
Wirtschaftsprüfer
124
Annual Report 2007
Corporate Management of Henkel KGaA
Boards/memberships as defined by §125 (1) sentence 3 of the German Stock Joint Corporation Act (AktG)
as at January 2008
SUPERVISORY BOARD
Membership of statutory
supervisory boards
Membership of comparable
supervisory bodies
Prof. Dr. Dr. h.c. mult. Heribert Meffert
Former Director of the Institute of
Marketing, University of Münster
Born in 1937
Member since May 4, 1998
BASF Coatings AG,
Kaufhof Warenhaus AG
UNIPLAN International GmbH & Co. KG
Andrea Pichottka1)
Secretariat of the General Executive of
IG Bergbau, Chemie, Energie, responsible
for research/technology, women/equal
opportunities, employees, advertising
Hannover
Born in 1959
Member since October 26, 2004
Siltronic AG
Chairman,
Private Investor, Düsseldorf
Born in 1935
Member since June 27, 1988
Winfried Zander1)
Vice-Chairman,
Chairman of the Works Council of Henkel
KGaA, Düsseldorf
Born in 1954
Dr. Friderike Bagel
Attorney at Law/Tax Consultant, Düsseldorf
Born in 1971
Member since April 18, 2005
Engelbert Bäßler1)
Member of the Works Council of
Henkel KGaA, Düsseldorf
Born in 1951
Member since March 1, 2005
Hans Dietrichs1)
Chairman of the Works Council of
Henkel KGaA, Genthin
Born in 1943
Bernd Hinz1)
Vice-Chairman of the Works Council of
Born in 1951
1)
Thomas Manchot
Born in 1965
Employee Representative
Annual Report 2007
125
SUPERVISORY BOARD
(continued)
supervisory boards
supervisory bodies
Prof. Dr. Dr. h.c. mult.
Heinz Riesenhuber
Former Federal Minister for Research
and Technology, Frankfurt/Main
Born in 1935
Evotec AG (Chairman),
Kabel Deutschland GmbH (Chairman),
VfW AG (Vice-Chairman)
HBM BioVentures AG, Switzerland,
Heidelberg Innovation BioScience,
Venture II GmbH & Co. KG
Founding Partner Blue Corporate
Finance, London
Born in 1966
Ten Lifestyle Management Ltd., UK
Michael Vassiliadis1)
Member of the Executive Committee of
IG Bergbau, Chemie, Energie, Hannover
Born in 1964
BASF AG,
Evonik STEAG GmbH (Vice-Chairman),
K + S AG (Vice-Chairman),
K + S Kali GmbH (Vice-Chairman)
Bernhard Walter
Former Chairman of
Dresdner Bank AG, Frankfurt/Main
Born in 1942
Bilfinger Berger AG (Chairman),
Daimler AG,
Deutsche Telekom AG,
Staatliche Porzellan-Manufaktur
Meissen GmbH (Vice-Chairman),
Wintershall AG,
Wintershall Holding AG (Vice-Chairman)
Werner Wenning
Chairman of the Executive Board of
Bayer AG, Leverkusen
Born in 1946
Evonik Industries AG,
Bayer Group mandate:
Bayer Schering Pharma AG
Dr. Anneliese Wilsch-Irrgang1)
Chemist, Düsseldorf
Representative of the Senior Staff of
Henkel KGaA
Born in 1958
Rolf Zimmermann1)
Member of the Works Council of
Born in 1953
Member from October 9, 2002
1)
Employee Representative
SUBCOMMITTEES OF THE SUPERVISORY BOARD
Nomination Committee
126
Annual Report 2007
Functions
Members
The Nomination Committee prepares the
resolutions of the Supervisory Board on
election proposals to be presented to the
Annual General Meeting on the election
of members to the Supervisory Board
(shareholder representatives).
Dr. Friderike Bagel
Bernhard Walter
SHAREHOLDERS’ COMMITTEE
supervisory boards
supervisory bodies
Chairman,
Born in 1935
Stefan Hamelmann
Vice-Chairman
Born in 1963
Ecolab Inc., USA
Dr. h.c. Christoph Henkel
Vice-Chairman
Managing Partner Canyon
Equity LLC, San Francisco
Born in 1958
Dr. Paul Achleitner
Member of the Board of Allianz SE,
Munich
Born in 1956
Bayer AG,
RWE AG,
Allianz Group mandates:
Allianz Deutschland AG,
Allianz Global Investors AG,
Allianz Lebensversicherungs AG
Allianz Group mandates:
Allianz Elementar Versicherungs-AG,
Austria (Chairman),
Allianz Elementar
Lebensversicherungs-AG,
Austria (Chairman)
Chairman of the Supervisory Board of
E.ON AG, Düsseldorf
Born in 1938
Deutsche Bank AG,
Deutsche Lufthansa AG,
E.ON AG (Chairman),
IKB Deutsche Industriebank AG
(Chairman),
Münchener RückversicherungsGesellschaft AG
Burkhard Schmidt
Managing Director of
Jahr Vermögensverwaltung
GmbH & Co. KG, Hamburg
Born in 1960
Druck- und Verlagshaus
Gruner + Jahr AG
Founding Partner Blue Corporate
Finance, London
Born in 1966
Ten Lifestyle Management Ltd., UK
Karel Vuursteen
Former Chairman of the Executive Board
of Heineken N.V., Amsterdam
Born in 1941
Akzo Nobel nv, Netherlands,
Heineken Holding N.V., Netherlands,
ING Groep nv, Netherlands,
Tom Tom N.V., Netherlands
Former President and
Chief Executive Officer of Henkel KGaA
Düsseldorf
Born in 1937
Born in 1969
BMW AG,
Deutsche Lufthansa AG,
Ergo Versicherungsgruppe AG
Annual Report 2007
127
SUBCOMMITTEES OF THE SHAREHOLDERS’ COMMITTEE
Functions
Members
Finance Subcommittee
The Finance Subcommittee deals principally
with financial matters, accounting issues including the statutory year-end audit, taxation
and accounting policy, internal auditing and
risk management in the corporation.
Dr. h.c. Christoph Henkel, Chairman
Stefan Hamelmann, Vice-Chairman
Dr. Paul Achleitner
Burkhard Schmidt (until June 29, 2007)
Human Resources Subcommittee
The Human Resources Subcommittee deals
principally with preparatory personnel matters concerning members of the Management Board, issues relating to the human
resources strategy and with remuneration.
Konstantin von Unger, Vice-Chairman
Karel Vuursteen
supervisory boards
supervisory bodies
Prof. Dr. Ulrich Lehner1)
Chairman
Born in 1946
E.ON AG,
HSBC Trinkaus & Burkhardt AG,
Porsche Automobil Holding SE,
Dr. Ing. h.c. Porsche AG,
ThyssenKrupp AG
Novartis AG, Switzerland
Dr. Jochen Krautter1)
Technologies
Born in 1942
BASF Coatings AG
MANAGEMENT BOARD
Kasper Rorsted
Vice-Chairman
Human Resources/
Infrastructure Services
Born in 1962
Cable & Wireless, Plc., UK,
Ecolab Inc., USA,
Henkel of America Inc., USA,
Henkel Central Eastern Europe GmbH,
Austria (Chairman),
Henkel Norden AB, Sweden
Alois Linder
Born in 1947
Member since January 1, 2002
Henkel Corp., USA (Chairman)
Dr. Friedrich Stara
Laundry & Home Care
Born in 1949
Member since July 1, 2005
The Dial Corp., USA (Chairman),
Wiener Städtische Allgemeine
Versicherung AG, Austria
Finance/Purchasing/
IT/Law
Born in 1948
Ashwa Technologies Ltd., Saudi Arabia,
Henkel Adhesives Middle East E.C., Bahrain,
Henkel (China) Investment Co. Ltd., China,
Henkel & Cie AG, Switzerland,
Henkel Central Eastern Europe GmbH, Austria,
Henkel Consumer Goods Inc., USA
(Chairman),
Henkel Ltd., UK,
Henkel of America Inc., USA (Chairman),
Henkel Technologies Egypt SAE, Egypt,
Saudi Arabian Adhesives Factory Co.,
Saudi Arabia,
Türk Henkel Kimya Sanayi ve Ticaret AS,
Turkey (Chairman)
Hans Van Bylen
Born in 1961
Ecolab Inc., USA,
Henkel Belgium N.V., Belgium,
Henkel Nederland B.V., Netherlands
1)
Personally Liable Managing Partner
128
Annual Report 2007
Further Information
CORPORATE SENIOR VICE PRESIDENTS
Jan-Dirk Auris
Asia-Pacific
Julian Colquitt
North America
Dr. Ramón Bacardit
Research
Bertrand Conquéret
Global Purchasing
Alain Bauwens
SBU Home Care Global
Laundry & Home Care Region
MENA/Asia-Pacific/Central
America
Wolfgang Beynio
Finance/Controlling
Jean Fayolle
Packaging & Construction
Adhesives
Dr. Attilio Gatti
Technologies Marketing &
Product Development
Dr. Wolfgang Gawrisch
Research/Technology
Dr. Andreas Bruns
Infrastructure Services
Enric Holzbacher
SBU Consumer & Craftsmen
Pierre Brusselmans
Adhesives/Building Adhesives
Corporate Development
Adhesives Technologies Region
Western Europe/Central
Brad Casper
Dial Corporation North America Eastern Europe/MEA
Dirk-Stephan Koedijk
Chief Compliance Officer
(from Dec. 1, 2007)
Human Resources
(until Jan. 31, 2008)
Norbert Koll
Cosmetics/Toiletries Region
Central Eastern Europe/CIS/
Asia-Pacific
Dr. Thomas Müller-Kirschbaum
Laundry & Home Care R&D/
Technology/Supply Chain
Stefan Sudhoff
SBU Body Care
Cosmetics/Toiletries Region
Southern, Western Europe/
North and Latin America
Günter Thumser
Henkel Central Eastern Europe
Libor Kotlik
Adhesives Technologies Supply Christian-André Weinberger
Chain & Operations
SBU Laundry Care Global
Thomas Gerd Kühn
Dr. Juliane Wiemerslage
Law
Human Resources
Andreas Lange
Laundry & Home Care Region
Western Europe
(from Feb. 1, 2008)
Dr. Peter Wroblowski
Information Technology
Tina Müller
SBU Hair, Skin & Oral Care
At January 1, 2008
Lutz Mehlhorn
Kathrin Menges
David Minshaw
Dr. Clemens Mittelviefhaus
Scott Moffitt
Juan Morcego
Georg Müller
Dr. Heinrich Müller
Rolf Münch
Julio Munoz-Kampff
Liam Murphy
Rolf Schlue
Dr. Matthias Schmidt
Dr. Berthold Schreck
Dr. Hans-Willi Schroiff
Jens-Martin Schwärzler
Dr. Johann Seif
Brian Shook
Dr. Simone Siebeke
Bart Steenken
Dr. Walter Sterzel
Marco Swoboda
Christoph Neufeldt
Helmut Nuhn
Dr. Boris Tasche
Richard Theiler
John Tierney
Mitchell Tinnan
Greg Tipsord
Thomas Tönnesmann
Patrick Trippel
Rainer Tschersig
Christian Twehues
MANAGEMENT CIRCLE I WORLDWIDE
Georg Baratta-Dragono
Harald Bellm
Francisco Beltran
Paul Berry
Cedric Berthod
Amy Bloebaum
Dr. Joachim Bolz
Oriol Bonaclocha
Robert Bossuyt
Ingo Brauckmann
Hanno Brenningmeyer
Daniel Brogan
Beat Buser
Sergej Bykovskikh
Marco Cassoli
Dundar Ciftcioglu
Jürgen Convent
Susanne Cornelius
Paul de Bruecker
Ivan de Jonghe
Hermann Deitzer
Serge Delobel
Dr. Alexander Ditze
Eric Dumez
Wolfgang Eichstaedt
Dr. Horst Eierdanz
Ashraf El Afifi
Steven Essick
Charles Evans
Dr. Norbert Fedtke
Thomas Feldbrügge
Dr. Peter Florenz
Dr. Thomas Foerster
Timm Rainer Fries
Holger Gerdes
Roberto Gianetti
Dr. Karl W. Gladt
Ralf Grauel
Bartholomew Griffin
Peter Günther
Rainer M. Haertel
Andreas Haupt
Ludger Hazelaar
Fridtjof Helemann
Michael Hillman
Georg Hoebenstreit
Dr. Alois Hoeger
Jos Hubin
Dr. Stefan Huchler
Dr. Hans-Georg Hundeck
Dr. Jochen Jacobs
Dr. Joachim Jäckle
Dr. Regina Jäger
John Kahl
Patrick Kaminski
Peter Kardorff
Klaus Keutmann
Dr. Wolfgang Klauck
Carsten Knobel
John Knudson
Nurierdem Kocak
Dr. Harald Köster
Peter Kohl
Dr. Werner Krieger
Dr. Marcus Kuhnert
Luis Carlos Lacorte
Tom Linckens
Oliver Luckenbach
Dr. Carlo Mackrodt
Dr. Klaus Marten
Joseph O’Brien
Michael Olosky
Carlos Eduardo Orozco
Dr. Uwe Over
Campbell Peacock
Jerry Perkins
Thomas Perlitz
Bruno Piacenza
Jeffrey Piccolomini
Arnd Picker
Michael Prange
Dr. Wolfgang Preuß
Ernst Primosch
Dr. Volker Puchta
Michael Rauch
William Read
Dr. Michael Reuter
Robert Risse
Gabriele Rusconi
Jean Baptiste Santoul
Anavangot Satishkumar
Wolfgang Schäufele
Ingo Schier
Robert Uytdewillegen
Tracy Van Bibber
Amelie Vidal-Simi
Dr. Vincenzo Vitelli
Ramon Viver
Dr. Rainer Vogel
Dr. Dirk Vollmerhaus
Paul Voordeckers
Kim Walker
Andreas Welsch
Dr. Jürgen Wichelhaus
Dr. Hans-Christof Wilk
Dr. Rudolf Wittgen
At January 1, 2008
Annual Report 2007
129
Further Information
Giacomo Archi
Faruk Arig
Further Information
Responsibility Statement
To the best of my knowledge, and in accordance with the applicable accounting principles for financial reporting, the
consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss
of the Group, and the management report of the Group includes a fair review of the development and performance of
the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.
Personally Liable Managing Partner and
Chairman of the Management Board of
Henkel KGaA
130
Annual Report 2007
Further Information
Financial Highlights by Quarter
1st quarter
in million euros
2nd quarter
3rd quarter
4th quarter
2006
2007
2006
2007
2006
2007
2006
2007
1,009
1,069
1,026
1,024
1,050
1,053
1,032
1,002
Sales
Laundry & Home Care
642
704
746
769
742
768
734
731
1,335
1,406
1,397
1,440
1,408
1,474
1,370
1,391
62
58
61
60
60
63
66
62
3,048
3,237
3,230
3,293
3,260
3,358
3,202
3,186
114
117
108
111
125
126
102
105
74
82
95
98
89
95
101
97
134
149
187
162
139
164
119
146
Corporate
–27
–25
–31
–32
–32
–26
1
–25
Henkel Group
295
323
359
339
321
359
323
323
Exceptional gains
–16
–
–41
–8
–
–
–43
–
Corporate
Henkel Group
EBIT
Laundry & Home Care
Exceptional charges
–
–
–
–
–
–
–
–
Restructuring charges
5
9
6
14
19
9
38
2
284
332
324
345
340
368
318
325
Adjusted EBIT
Earnings before tax
261
293
332
326
298
337
285
294
Net earnings
185
210
248
239
217
245
221
247
Earnings per
preferred share1)
in euros
0.42
0.48
0.57
0.54
0.49
0.55
0.51
0.57
Adjusted earnings per
preferred share
in euros
0.40
0.50
0.51
0.56
0.52
0.58
0.50
0.57
Annual Report 2007
131
Further Information
1)
Further Information
Ten-Year Summary
1998
1999
2000
2001
2002
2003
2004
200417)
2005
2006
2007
10,909
11,361
12,779
9,4104)
9,656
9,436
10,592
10,592
11,974
12,740
13,074
791
857
950
6024)
666
706
80016)
996
1,162
1,298
1,344
Earnings before tax
644
692
816
7346)
664
768
80816)
1,007
1,042
1,176
1,250
Net earnings
372
404
505
4765)
431
53010)
55116)
748
770
871
941
Earnings after minority
interests
336
364
468
4376)
435
51911)
55016)
747
757
855
921
Earnings per preferred
share (EPS)1)
0.78
0.84
1.08
1.177)
1.02
1.2212)
1.2916)
1.75
1.77
1.99
2.14
Total assets
9,130
9,856
11,382
9,365
8,513
9,362
13,138
13,287
13,944
13,346
13,048
Non-current assets
5,164
5,504
6,295
5,490
4,927
4,723
7,400
7,989
9,065
8,664
7,931
Current assets
(including deferred
tax assets)
3,966
4,352
5,087
3,875
3,586
4,639
5,738
5,248
4,879
4,682
5,11718)
Debt
6,301
6,618
7,882
5,761
5,150
5,976
8,937
8,941
8,545
7,799
7,342
2,829
3,238
3,500
3,604
3,363
3,386
4,201
4,346
5,399
5,547
5,706
as % of total assets
31.0
32.9
30.8
38.5
39.5
36.2
32.0
32.7
38.7
41.6
43.7
Net return on sales %2)
3.4
3.6
4.0
3.69)
4.5
5.613)
5.1216)
7.06
6.43
6.84
7.20
6)
12.0
14)
16)
17.2
17.7
16.1
17.0
in million euros
Sales
3)
Return on equity %
13.1
14.3
15.6
Dividend per ordinary
share in euros
0.26
0.29
0.35
0.35
0.35
0.38
0.41
0.41
0.43
0.48
0.518)
Dividend per
preferred share in euros
0.28
0.31
0.37
0.37
0.37
0.40
0.43
0.43
0.45
0.50
0.538)
Total dividends
119
131
157
156
156
167
185
185
193
214
2278)
Capital expenditures
(including financial assets)
979
746
1,359
6644)
484
58015)
4,628
4,678
1,119
897
548
Investment ratio as %
of sales
9.0
6.6
10.6
5.3
5.1
6.1
43.7
43.7
9.3
7.0
4.2
Research and
development costs
250
279
320
2555)
259
257
272
272
324
340
350
56,291
56,620
60,475 47,3624)
47,203
48,328
49,947
49,947
51,724
51,716
52,303
15,257
15,065
15,408 11,1214)
10,944
10,767
10,488
10,488
10,264
9,995
9,899
41,555
4)
36,259
37,561
39,459
39,459
41,460
41,721
42,404
Number of employees
(annual average)
Germany
Abroad
41,034
1)
13.6
45,067 36,241
15.8
16.1
2)
net earnings / sales
3)
net earnings / shareholders’ equity at the start of the year
4)
continuing businesses
5)
541 million euros including net gain from exceptional items
6)
before exceptional items
7)
after the sale of Cognis and Henkel-Ecolab: 1.02 euros
8)
proposed
9)
net earnings / sales of 13,060 million euros
10)
net earnings excluding Clorox share buy-back: 500 million euros
11)
earnings after minority interests excluding Clorox share buy-back: 489 million euros
12)
before exceptional items in 2003: sale of participation in Wella, Extended Restructuring measures and Clorox share buy-back: 1.16 euros
13)
net return on sales excluding Clorox share buy-back: 5.3 percent
14)
return on equity excluding Clorox share buy-back: 14.9 percent
15)
excluding Wella proceeds of 280 million euros
16)
before exceptional items
17)
restated and comparable
18)
including deferred taxes
132
Annual Report 2007
Credits
Calendar
Published by:
Henkel KGaA
40191 Düsseldorf, Germany
Phone: +49 (0)211/7 97-0
Annual General Meeting of Henkel KGaA 2008:
Monday, April 14, 2008
© 2008 Henkel KGaA
Edited by:
Corporate Communications, Investor Relations
English Translation: Jeannette Jennings,
Paul Knighton
Coordination: Rolf Juesten, Oliver Luckenbach,
Dirk Neubauer
Concept and Design: Kirchhoff Consult AG, Hamburg
Photographs: Henkel, Andreas Fechner, Wilfried Wolter
Produced by: Schotte, Krefeld
Corporate Communications
Phone: +49 (0)211 797-3533
Fax: +49 (0)211 798-2484
E-mail: [email protected]
Investor Relations
Phone: +49 (0)211 797-3937
Fax: +49 (0)211 798-2863
E-mail: [email protected]
Publication of Report
for the First Quarter 2008:
Wednesday, May 7, 2008
for the Second Quarter 2008:
Wednesday, August 6, 2008
for the Third Quarter 2008:
Wednesday, November 6, 2008
Fall Press and Analysts’ Conference 2008:
Wednesday, November 6, 2008
Press Conference for Fiscal 2008
and Analysts’ Conference 2009:
Wednesday, February 25, 2009
Annual General Meeting of Henkel KGaA 2009:
Monday, April 20, 2009
Up-to-date facts and figures on Henkel also
available on the internet: www.henkel.com
PR. No.: 208 10.000
ISSN: 07244738
ISBN: 978-3-923324-57-6
Responsible Care®
The FSC logo identifies products which contain wood
from well managed forests certified in accordance
with the rules of the Forest Stewardship Council.
This annual report was printed on Galaxi Keramik
FSC from Zanders.
This publication was printed on paper from pulp bleached without chlorine and bound with Purmelt MicroEmission
and Sanicare for the highest standards in occupational health and safety. The cover is protected by a film of Adhesin
laminating adhesive. All product names are registered trademarks of Henkel KGaA, Düsseldorf, Germany, its affiliated
companies or its collaboration partners.
This document contains forward-looking statements which are based on the current estimates and assumptions made by the corporate management
of Henkel KGaA. Forward-looking statements are characterized by the use of words such as expect, intend, plan, predict, assume, believe, estimate,
anticipate and similar formulations. Such statements are not to be understood as in any way guaranteeing that those expectations will turn out to
be accurate. Future performance and the results actually achieved by Henkel KGaA and its affiliated companies depend on a number of risks and
uncertainties and may therefore differ materially from the forward-looking statements. Many of these factors are outside Henkel’s control and cannot
be accurately estimated in advance, such as the future economic environment and the actions of competitors and others involved in the marketplace.
Henkel neither plans nor undertakes to update any forward-looking statements.

Henkel: Annual Report 2007

Transcription

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